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Knowledge Management – the Engine for Innovation

March 20, 2010 by Andrew (Drew) · Leave a Comment 

In advocating for innovation it seems as though “innovation happens” is the mindset carried by many mistaken adherents to the cause. You just have to trust it and it will come, they say (or not). This is the equivalent of saying “magic happens” when faced with a “Mechanical Turk”. Data goes in one end, magic happens, and a desired output comes out the other end. I’m sorry – innovation is not based in gold-pooping unicorns, nor is it something that should be left to the whims of inevitability or caprice. Innovation needs to be specifically and studiously fed a fuel of knowledge in order to succeed. And if knowledge is the fuel, then knowledge management is the engine that drives innovation.

It’s not what you know, it’s what you do with what you know
Of central importance is the changing nature of competitive advantage – not based on market position, size and power as in times past, but on the incorporation of knowledge into all of an organization’s activities.
- Leif Edvinsson Swedish Intellectual Capital Guru

When Peter Senge defined The Fifth Discipline (as opposed to The Fifth Element) in 1994, one of the tenets of embracing the concept of becoming a “learning organization” was the use of effective knowledge management. Knowledge management in his model was a way to accelerate the performance of the organization so that it might better think holistically and systemically, and thereby design better solutions to its challenges faster. It required that organizations not only attract and retain bright people, but that they harness the thinking of those bright people in such a way that their efforts could be captured and populated across the organization.

The issue with knowledge in organizations is not that it isn’t available; the problem is that knowledge is not readily available at the time and point of need. As this dilemma relates to innovation, it is an even bigger issue. Innovation places huge knowledge demands on organizations. To be truly effective it must reach across all knowledge sources both internal to the organization and increasingly, thanks to open innovation practices, external to it. Knowledge must be easily and freely available for recombinant thinking approaches and to be applied directly to pressing challenges. Unfortunately, many knowledge management solutions sacrifice ease and access to the twin overlords or taxonomy and ownership.

Permission-based knowledge management systems, the ones that sequester information into functional groups with associated administrative and rights management restrictions, do not foster and promote the kind of knowledge transfer for which the learning organization calls. They kill it. Is there a place for intellectual property protection and management? Absolutely. But knowledge management need to head towards greater freedom to be of better value for innovation.

Groups filled with big brains and bright ideas applied to thorny issues equals…
Imagination is more important than knowledge
- Albert Einstein

What is the promise of knowledge management? For one thing it enables organizations to leverage their tacit knowledge more broadly among their members. By applying knowledge management to key data sources, and capturing the experience of organization members in an explicit and coordinated manner, the opportunities to decrease the innovation cycle time are correspondingly increased.

To better coordinate knowledge management, via systems and processes not only technologies, user-led innovation communities may be created. Innovation communities when people within an organization who work together explore and create new approaches and then implement them. They are usually a subset of communities of practice or information communities (both of which are commonly tied to functional expertise.) Communities of practice are communities or networks of individuals and/or organizations that coalesce around an information commons, usually a body of knowledge that is open to all on equal terms. The Project Management Institute is one such community of practice.

Knowledge management will never work until corporations realize it’s not about how you capture knowledge but how you create and leverage it.
- Etienne Wenger

From communities of practice, innovation communities may form to directly apply their shared knowledge in new and interesting ways. As the costs of diffusing knowledge are getting steadily lower, as computing and communication bandwidth expand, the geographic dispersion and cultural diversity of these groups may increase, too. This makes the notion of having the big brains all in the same room for innovation to occur (e.g., the Manhattan Project) is no longer a necessity. But as a proponent of both knowledge management and face-to-face communication (and relationship-building) I see a place for them both to continue to coexist.

Dick Brandon once said that, “documentation is like sex: when it is good, it is very, very good; and when it is bad, it is still better than nothing.” In a sense, knowledge management exists in a similar vein. Some, no matter how rudimentary, can be helpful in the development of innovation. The challenge is to “wire up” knowledge so that it is readily available to inform innovation practices, such as, design thinking, ethnographic study, and prototyping. That process is often best addressed at the human interface level.

The innovation wisdom of individuals, crowds, communities, countries
Knowledge without wisdom is a load of books on the back of an ass.
- Japanese proverb

The purpose of knowledge management is to help an organization marshal and management it’s knowledge for the best gain. Knowing who to connect and what to connect them to is a part of the wiring up previously mentioned. It takes a clear understanding of the social network at play in an organization to understand who those people might be that can most benefit from both access and connection. It takes a form of organizational wisdom that many organization’s lack.

In a previous post I discussed a variety of impacts that may be felt through an over-reliance on the formal power resident in the organization chart. Knowledge management cannot fall prey to the turf battles that organization charts so often represent. Instead it must be liberated so that the cross-pollination often necessary for the greatest innovations might occur. Because even if you manage your knowledge carefully – you organize it, structure and store it, within an inch of perfection – if people aren’t using it to help make your organization more effective, efficient, and successful, what’s the point. A better filing system is not the heart of creativity. But knowing and using what you know?

There’s genius lurking in those files. It is just waiting for the right people to use it.

There’s no such thing as knowledge management; there are only knowledgeable people. Information only becomes knowledge in the hands of someone who knows what to do with it.
- Peter Drucker

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Customers in Innovation – Sound and Fury Signifying…

March 12, 2010 by Andrew (Drew) · Leave a Comment 

The watch words for innovation at present are “open innovation” and “customer-centricity”. The idea that the customer should not only be invited into the innovation process, they should be at its very heart, is of paramount significance. The oft-quoted Henry Ford, “If I’d asked my customers what they wanted, they’d have said a faster horse,” for years held sway over product development. The thinking was that customers don’t know what they want until we tell them and sell them. That may have worked in the era of Mad Men, but customers’ access to data and ability to wield it to their own purposes means that that they can be excluded from product and service innovation at a producer’s peril.

We don’t know what we don’t know
If you’re not serving the customer, you’d better be serving someone who is.
- Karl Albrecht

The fact remains that most companies producing products and services have only a limited perspective on their customers’ needs (as those needs relate to their set of offerings). Which means often the stewards of innovation are flying blind. Recently April Dunford, of Rocket Watcher, posted on why it might be important to run a customer advisory board. Her directives speak to the need to include a customer perspective in the mix that not only provides insight into the customer experience of your products and services, but one that also reaches beyond the horizon to provide a glimpse into potential new markets.

Without customers’ perspectives it is very hard to know limits of what you do and do not know. Inviting them into the mix means that even if you can’t name the dragons at the end of your world (read: market) you can at least see them. The other opportunity to be created by including customers’ views in your thinking is that not only will the community that they form will feed you new ideas and innovation options, that same community will also generate the goodwill that comes from an expanded network. You can create the opportunity for customers to share and network with each other, which may not have an immediate benefit to you, but you better believe it will have a positive return.

One of my personal guides as I ventured into the world of consulting services many years, Nancy Truitt Pierce (the Founder and CEO of Woods Creek Consulting Company in the Seattle, Washington state area) was a great proponent of the customer advisory council. She actually turned the advisory council concept on its head and made networking the heart of its reason for being. She now has a model of consortia that encompass the needs of her customers: technology sector executive peers, senior executive peers, sales executive peers, and CFO’s. Each group meets to share insights, advise each other, and Nancy moderates. Long term many members have become Nancy’s clients and she brings their insights back into her firm to innovate her service offerings

Our customers don’t know but they can show us
Be everywhere, do everything, and never fail to astonish the customer.
- Marshall Field

For many companies though, the customer cannot conceive what they need because they are too close to their issues. No matter how hard they might try to articulate their concerns they fall short. This leads to poor communication and inadequate responses on the part of market to meeting their needs. This is not satisfactory for anyone.

Again, the key is to get closer to the customer so that the path to innovation is as pain-free as possible. The design power-house, IDEO, when working on product design opportunities for their clients uses ethnographic study (targeted, field-based observation) to achieve this end very readily. They have perfected a multi-layered approach to observing the customer experience, that may include questioning, but more often than not involves direct experience of customer’s challenges live, in real-time. Sometimes it involves their staff essentially moving into the home of a customer in order to glean first-hand experience. One of IDEO’s partners, Proctor & Gamble has actually adopted this concept and uses it to drive their own innovation processes.

P&G’s approach is called the “Living It” program. Living It creates opportunities for P&G’s ethnographers to live with customers (willing participants), to observe how they go about their everyday lives. The ethnographers get to rapidly identify customers’ needs first hand by seeing what their customers are trying to do, and how they might be hampered by their environment or the inadequacy of their tools. They can then use these insights to identify potential new products that would make customers’ everyday lives easier. This focus on understanding customers’ needs through jobs and desired outcomes is absent from the question and answer-based innovation process that passes for customer involvement in many companies today.

Opening innovation to the customer experience
The purpose of business is to create and keep a customer.
- Peter F. Drucker

The next step beyond experiencing the customer live and in real-time is to actually open the innovation process so that they are not passively observed; open innovation brings customers into the mix to co-create and design solutions that meet their needs without the filter of internal enterprise interpretation. This kind of inclusion would have been considered nightmarish in past generations. “Invite the customer to develop their own products?! Why the heck would I do that?!” might have crossed the mind of more than one researcher or product developer. The inherent fears at play driving that reaction were loss of control and like Nosferatu, once they were invited into the process they might never leave. The shock was that not only did customers behave themselves, but given their vested interest in the design outcome, they were enthusiastic collaborators.

Stefan Lindegaard, the founder of innovation consultancy 15inno based in Copenhagen, is one of the most vocal proponents of the open innovation model. His advocacy for open innovation is breaking open the discussion about its utility for all types of companies. Previously open innovation was reserved as the practice of larger companies with the funds to develop a customer engagement model (see P&G above), yet Stefan is making the case that open innovation should not only be embraced by all companies, no matter how small, but that it should tap the widest global network possible. His reasoning, why limit yourself when who knows where you might make the best solution connection?

Not every suggestion warrants action (but they all warrant a response)
Innovation comes from the producer — not from the customer.
- W. Edwards Deming

What happens when your open innovation network comes with ideas that are not the right fit for your organization? One of the failings of inviting the customer into the innovation experience is that companies do not actively manage that experience. If you think a customer having a poor purchasing experience can cause havoc you haven’t seen anything until you have seen a customer relationship poorly managed when it is invited into a closer discussion about product development and is ignored, or worse yet, discounted.

Including the customer in your innovation processes requires just as much planning and management as your marketing and sales management processes. To neglect this preparation, or poorly implement the management of the customer experience as you bring them into your organization’s systems and processes can not only damage the immediate client relationship it can actually damage their total lifetime value to your enterprise.

Before a customer suggests an idea that you know you cannot and will not implement, develop a plan to address that potential problem. Either, remove the circumstances in which that request might be formed by developing a set of clearly defined and constantly visible expectations against which you can manage their experience. Or, develop contingent strategies that acknowledge their contribution and defuse its impact. Failure to do so might result in disastrous consequences. Losing customers while trying to meet their needs is certainly not a good result from your innovation efforts.

After all, you are trying to meet their needs not create new ones that they will seek another provider to solve!

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Resources for Innovation – The Power of Constraints

February 28, 2010 by Andrew (Drew) · Leave a Comment 

The wise stewardship of resources is the task of any organization. How those resources are deployed for maximum gain is the key responsibility of organizational leadership. The only problem with this concept is what happens when wise stewardship comes up hard against the necessary risking of resources for the material benefit of innovation? Unfortunately, in the present “economic unpleasantness” as a dear friend keeps calling the train wreck that is this great recession, stewardship of resources has digressed to hoarding of resources. Save for one notable exception – human resources.

We don’t have the energy to exploit…anything
The greatest tragedy in America is not the destruction of our natural resources, though that tragedy is great. The truly great tragedy is the destruction of our human resources by our failure to fully utilize our abilities, which means that most men and women go to their graves with their music still in them.
- Oliver Wendell Holmes

The crisis in our economy is shedding harsh light on the absence of any true understanding of how to overcome the organizational need to protect the bottom-line while also leveraging the most creative asset any organization can access, its people. Instead, jobs have been cut in record numbers. The unemployment rate, not just in the USA but in many Western economies, is approaching record highs. All the while the usual levers are being pulled. Reductions in capacity. Reductions in expenditure. Reductions in our expectations for a more positive future. And this means that a pervasive, innovation averse, risk-avoiding mindset is prevailing in most quarters. It’s simply all, too, hard.

As an aside, it is fascinating that one of the major beneficiaries of the economic downturn is global climate change. Apparently the idling of the voraciousness of the economic engines which has been burning so hot last decade has been a significant boon to the limitation of the emission of greenhouse gases. Thank you for small mercies, I guess. That problem set is still not solved but we seem to have bought some additional time in which to avoid doing anything meaningful. It’s too complex. And hard.

What happens when people stop, well, everything? A cascade occurs, and not a good one. It certainly doesn’t mean resources become instantly abundant and available. No, we can thank the remarkable export of the Toyota Production System (as Lean initiatives) across many manufacturing sectors for the fantastic ability to only produce to demand. This latest cascade means everything becomes scarce. There is no excess. Nothing with which an innovator may play, or test, or prototype. Just like a faucet being turned off. The flow of goods, services, and money has slowed to a trickle or even stopped altogether.

All we are left with, all that we have available to us, are the people who comprise our organizations. And what have we done to them? Nothing save lower their expectations or show them the door.

Serve more than one purpose
The greatest achievement of the human spirit is to live up to one’s opportunities and make the most of one’s resources.
- Marquis de Vauvenargues

Let’s reframe the challenge. What if we take as true that oft-quoted phrase, “our people are our greatest assets”? How does that mindset begin to influence the choices we make about innovating our way out of our current mess?

One creative agency in Toronto, Zulu Alpha Kilo, decided that the best way to advertise itself was to actually take what it does to the streets. They setup a “box” in Dundas Square in the heart of downtown Toronto and on the first really cold day of the season in the city. They placed a team of eight interdisciplinary thinkers into the plywood box where they solicited creative challenges from passers-by – over 117,000 in all some of whom waited over two hours to present their challenges. Twelve hours later not only had the team presented solutions for many problems they had also cracked open the façade of a design agency so the public could see the workings inside. Not a bad piece of self-promotion either to put creativity on display.

Organizations like the agency above that choose to create a meaningful creative bargain with employees seem to be finding their way. Organizations like Google, SAS and 3M, which even in downturns still expect their employees to devote a percentage of their work time to personal projects, also will continue to see the benefit of a similar trust over time. It will be returned in goodwill, enthusiasm and commitment, to say nothing of the possibility of new products and services that might drive top and bottom-line growth. Their people are asked to do more than one thing, they have a “job” to do for sure, but they are also expected to explore and contribute in other ways, too.

While contemplating setting new expectations for our human resources why not also consider setting the expectation that all resources be used in more than one way. Paper being reused for notepads is nothing new, but what about expired materials such as this novel idea from a design student involving expired prophylactics. Yes, the humble condom as haute couture. But the concept of reuse is nothing new. Making it an embedded and expected part of all aspects of production and trade is.

Many technology firms are leading the way. Oracle is continuing to support the work that Sun began even after the acquisition; usually this would be a signal for abandoning “non-additive” projects to the bottom-line. HP has also made reuse a fundamental part of its approach to its business. Now if only “Big Ink” could figure out a way to reclaim the ink on paper destined for recycling! It seems Xerox has a similar idea but has taken a different tact.

These efforts are good first steps but this mindset needs to be seeded as widely as possible. The innovation required to do that may point to a way out of the economic doldrums and toward a vibrant alternative economic reality closer to the cycles presented in William McDonough’s “Cradle to Cradle”. Which doesn’t begin to cover what might be accomplished by repurposing from the private sector to the public sector or from the for-profit to the non-profit.

It’s now how much – it’s how well
Time is the scarcest resource and unless it is managed nothing else can be managed.
- Peter Drucker

Many artists relish resource constraints, although they might initially grumble at the limitations. Instead they often apply themselves within limitations to create art that is unique and surprising. Sometimes those constraints aren’t only material; their constraints may be social, cultural or even political. Yet still they find a path to success by not taking the box they are handed at face value. This ability to look beyond what is in hand to what is possible with that resource applies in all cricumstances in which innovation can and must thrive.

The work of Inc. Magazine’s Entrepreneur of the Year, Kevin Surace the CEO of Serious Materials, is a case in point. He is picking up bankrupt firms that have been strip-mined of all their resources (and their human resources previously carelessly set aside.)He is willing to invest in the R&D and building out production capacity to ensure his company’s long-term health. He is willing to forgo profit to do so, too. He is applying his limited resources, placing bets now, to ensure his economic future. How many other companies are willing to do that today?

Here’s the thing. If we don’t invest time, energy, effort and our resources in innovation now, when we need it most, we are in for a long and painful ride. We need to take the time to innovate. To find the better way. Those who do will be most successful in the long-term. Not because they happen upon a great idea, but because the habit of spending resources on innovation even during down times sets a pattern for revitalization that is necessary for any organization.

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Innovation Is Not Clockwork – The Challenges of Innovation Systems

February 19, 2010 by Andrew (Drew) · Leave a Comment 

A system is a network of interdependent components that work together to try to accomplish the aim of the system. A system must have an aim. Without the aim, there is no system.
- W. Edward Deming

Everything is connected so beware the tragedy of the commons
Previously we addressed the need to create innovation processes that bear the risk of innovation. This boils down to two aphorisms, “if you can’t stand the heat get out of the kitchen” and “it is okay to make mistakes as long as you learn from them.” Not earth-shaking concepts, certainly, but creating an environment within existing business systems that might allow practicing that behavior is a true challenge.

Businesses are complex systems. They are not clockwork mechanisms. They contain myriad subsystems each of which is responsible for producing value through a series of interdependent relationships. This doesn’t even consider the ecosystem within which the business resides; such as, the external competitive market, supply chain and customer segments. The common mistake when attempting to build innovation practices within an enterprise is to “ring-fence” the practice within a functional domain. Relegating innovation to Research & Development or Product Development may provide it with a home but does not necessarily mean it will flourish. This misunderstanding, that innovation is not connected to anything else, almost always backfires as other functional subsystems respond in unanticipated ways.

Ignoring the interconnections between organizational subsystems causes havoc when innovation is demanded of all areas of the business, instead of one function, and the competition for resources becomes fierce. The heart of this conflict is called, “the tragedy of the commons” and it occurs when the subsystems in an organization are placed in a competitive relationship with each other and are forced to act in ways that are destructive to the organization overall. The current push for “innovation everywhere” is a pattern that is reinforcing this dilemma.

For example, without establishing strategic priorities, a consumer products firm I worked with decided that all departments without failure were going to improve their processes. The number of performance improvement projects proliferated tenfold overnight. As a result, project resources were spread so thin nothing was accomplished, but the effort was not canceled until six months had been burned. The result was “initiative fatigue”, a loss of support for organizational leadership, and a drop in market performance. The very opposite of what was desired.

Don’t control the players – change the rules
Is the system going to flatten you out and deny you your humanity, or are you going to be able to make use of the system to the attainment of human purposes?
- Joseph Campbell

If we cannot change the system via simple choices how can we create a better environment for innovation within our organizations? Rather than telling people what to do, guide their behavior by changing business rules within existing business systems that drive the behavior you wish to see.

In his great book, Predictably Irrational, behavioral economist Dan Ariely explores how expectations, emotions, social norms, and other embedded social and psychological forces influence our behavior. One great insight he presents is the way in which the human brain is wired to adopt certain patterns of behavior based on first impressions and decisions. These impressions are imprinted on our brains and govern our approach to similar circumstances. We have “anchored” our experience and even in the face of evidence may act against our own interests because of its influence in our thinking. I also explored this process, which is directly related to priming, in a previous post.

To change this imprinted pattern of thinking it is necessary to change the rules. Luxury goods manufacturers understand this explicitly, as Ariely explains. He notes the case of black pearls which when first introduced to market were a flop. They were gun-metal grey and looked like oversize ball bearings. It took James Assael, an Italian diamond and pearl dealer, to change the rules. He made a deal with Harry Winston to display them in the window of his 5th Avenue jewelry store in Manhattan surrounded by other precious gems. Assael also placed full page advertisements in glossy magazines to promote this new luxury item. Suddenly, black pearls were all the rage. Why? In order to make someone want something he changed the rules and made it scarce. DeBeers has done this for years with diamonds, too.

It is much more effective to change the rules of the game so that it is to most people’s advantage to make choices that are good for the whole system of innovation. What current rules of innovation could you invert, subvert or otherwise transform to create the behavior you’re looking for in your organization?

Foresight always wins and preparation trumps reaction
Everything affects everything else in one way or another. Whether you are aware of that or not does not change the fact that this is what is happening.
- John Woods

Innovative solutions to problems affecting complex systems take time to design, develop, test and implement. If we wait until the problem develops before applying our resources to addressing its root cause, we may be too late to take meaningful action. In the previous post on processes I addressed the notion of anticipatory behavior. That kind of foresight applied to present need can be a powerful tool for ongoing successful innovation.

Too many organizations pull the innovation trigger when faced with a crisis. Be it a market crisis or, more commonly, a product crisis the circumstances reinforce reactive behavior. If not outright panic, this scenario does not foster the use of structured and reasoned thinking to guide decision-making. Instead rapid fire solutions to address the changing conditions on the ground don’t solve the problem in the market and they may make the effects of the problem worse.

Across an organization’s innovation systems, looking ahead to anticipate problems is key. In the current pharmaceutical marketplace, many larger firms were faced with greatly diminished drug development pipelines yet they carry large commercialization operations. Blockbuster drugs are increasingly few and far between. With this realization, the action that most firms have taken is to re-double their development efforts in R&D as well as to identify as many smaller firms with potential marketable drugs as possible to acquire. What if their leadership teams had decided that, rather than reinforce their old business model (shoot for the blockbuster), they were going to anticipate changing market conditions and transform their companies from drug manufacturers to providers of comprehensive health services or another alternative business model. Would they not be better off heading off problems before they disrupt their market (and cash flow) entirely?

Why no great change? Because change is often painful, awkward and a dreadful inconvenience.

Don’t be fooled by system cycles – it’s not the climate it’s the weather
As human beings we love stability. Many of us are simply unable to recognize cyclical patterns around us, especially when they take years to unfold. The boom/bust cycle in the US economy is one such pattern which seems to elude many. This cycle seems to be on a fairly regular 20 year cycle and yet, during the peak (just prior to the bust) many people only see the positive “upside,” regardless of the Cassandras crying in the wilderness about the impending doom. And then the inevitable happens – the dip, slip, or worse yet, crash.

On the other side, when at the bottom of an economic recession, many struggle to see positive signs that economic systems might manifest. Their pessimism is only countered when they feel the positive impacts of the expanding economy directly. This cycle is present all around is. When job categories are oversupplied or undersupplied the negative feedback loops that cause people to go into a particular career usually lag the changing market needs. It’s also present in the climate. With recent record snows on the East Coast of the USA many were heralding the end of global warming. However, it is not case. The weather system is not representative of the climate system, it is a subsystem, and its cycle-time can be measured in months, weeks and days. The climate system is measured in decades, centuries and millennia.

As with the economy, the best time to capture the market is when everyone is contracting. When the present hoopla about “innovation everywhere” dies down those organizations that have embedded innovation into their business systems will find the opportunities ripe for capitalizing on others’ short-term thinking and rapidly fading memories.

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Working The Processes of Innovation – Learning to Love & Live Failure

February 12, 2010 by Andrew (Drew) · 1 Comment 

Failure is simply the opportunity to begin again, this time more intelligently.
- Henry Ford

Creating A Structure To Support Things Not Yet Seen
The crucial variable in the process of turning knowledge into value is creativity.
- John Kao

To talk about innovation and processes in the same breath seems oxymoronic. While most organizations are designed to take inputs and convert them through a series of conversion efforts into products or services for sale, they are singularly ill-prepared to bring new things to market. Why?

Existing organizations apply functional expertise in the form of departments like; Design, Product Development, Sourcing, Manufacturing, Marketing, Sales, Customer Support, HR, IT, and Finance, etc. They take known inputs, apply existing business processes for conversion into value, and produce recognizable outputs. Where’s the point of inflection? Where is are the processes that foster innovation? The whole enterprise is an inherently stable system designed to retain that stability.

To create innovation there must be a structure that can support the exploration, the risk-taking, the resource expenditure without direct monetary return. A structure that supports innovation must capture and support an organization’s ability to reach beyond what it produces in the present to what it might produce for the future. It demands a structure that can seek and use unknown resources, to build the unknown for unknown customers (or at least meet current customers’ unknown needs!)

The challenge is to reach into that unknown and pull some sense of meaning into the present. To use questioning and learning to first understand, then conceive, then sketch, then model, then prototype an innovation into existence. Part and parcel of that process is to be resilient enough to survive the inevitable hazards of the associated failure.

A Framework For Failure
Half the failures in life arise from pulling in one’s horse as he is leaping.
- August Hare

When planning for innovation how we create space for and manage risk (and the possibility of failure) is a primary factor in long-term success. Creating an organizational framework that not only can accept that risk is a primary ingredient in development of the truly new, but one that also has the operational flexibility and resilience to survive the unanticipated failure, is crucial. Yes, the desire to create more first-time successes is strong and should be recognized and valued. But nothing in innovation is ever perfect. Chaos and failure must be expected regardless of whether or not their extent might be anticipated.

A basic process model for innovation might be the following:

At each step there are a series of actions that happen, some sequential and some parallel, but all requiring a vigilance in terms of risk. The paramount question used throughout this process is not framed by “What” or “How” or “How much” but by “Why?” The inquiry contained within “Why?” demands that we constantly test our thinking through every step in the process of innovation. It helps us look beyond the expected and the commonly understood data embodied in the embedded business rules, behavioral norms and measures of our success. This inquiry generates awareness of the wider system of interdependent elements around a design challenge. It also gives us comfort in that it helps us frame possible responses to potential failures. It inoculates us against the pain of failure, keeping us strong for the next attempt.

Beyond High Reliability Organizations
One very important aspect of motivation is the willingness to stop and to look at things that no one else has bothered to look at. This simple process of focusing on things that are normally taken for granted is a powerful source of creativity…
- Edward de Bono

One of the off-shoots of social psychology and organization theory explores the concept of “sense-making”. One of pioneers in this area is Karl Weick. He noted that people try to make sense of organizations, and organizations themselves try to make sense of their environment. They are both navigating an ever-changing situation. What does this mean for innovation processes? Weick asks us to focus our attention on questions of ambiguity and uncertainty in this sense-making. Sense-making is the process of creating situational awareness and understanding in situations of high complexity or uncertainty in order to make decisions. This is a process of inquiry and seeking understanding in a dynamically changing environment. In terms of innovation the environment is the formed by the process of creating something new.

Moving from situational awareness in individuals, to shared awareness and understanding, to collaborative decision-making is a socio-cognitive activity. This approach considers that the individual’s cognitive activities are directly impacted by the social nature of the exchange and vice versa. This is, in a form, a process of co-creation. And the culmination of that sense-making process is one that Weick was also one of the co-developers of, the concept of the “high reliability organizations”. (Others involved in this development were, Karlene H. Roberts, Herbert Simon, and James March.) As noted in Wikipedia.org, “A High Reliability Organization (HRO) is an organization that has succeeded in avoiding catastrophes in an environment where normal accidents can be expected due to risk factors and complexity.” In short is an organization that can be best described as resilient in the extreme.

Organizations that must be successful all of the time continually reinvent themselves. For example, an aircraft carrier uses its functional units slightly differently depending on whether they are on a humanitarian mission, a search and rescue mission, or are engaged in night flight operations training. The same can said for an organization that delivers robust innovations time and time again. They may in fact be termed “highly reliable innovation organization”. They continually reinvent themselves. They build flexible systems that marshal their resources, via their innovation processes, to capitalize on opportunities as they arise. They take great risks, fail often, and yet they endure.

Life is a process of becoming, a combination of states we have to go through. Where people fail is that they wish to elect a state and remain in it. This is a kind of death.
- Anaïs Nin

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Afterlife: An Essential Guide To Design For Disassembly, by Alex Diener – Core77

February 1, 2010 by Andrew (Drew) · Leave a Comment 

What if we take another run at the idea that everything has a life beyond its immediate life? What if we decided that things must be reparable, recoverable, recyclable, re-purpose-able? How different would then be our innovation and design approaches? Our disposable society must be disassembled.

Afterlife: An Essential Guide To Design For Disassembly, by Alex Diener – Core77.

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Innovation Economies & The Benefit Of Creative Destruction

January 29, 2010 by Andrew (Drew) · Leave a Comment 

…Business is not a sporting event. Victory for one company doesn’t mean defeat for everyone else.
- James Surowiecki

Innovation As An Economic Mover And Shaker
Today innovation sits at the heart of economic value creation. If the 1980’s were all about productivity, the 1990’s were about quality, and the 2000’s about globalization, the current decade will most likely be about the capacity of organization to harness the controlled chaos inherent in innovation to create value. With the acceleration of globalization process, innovation is more and more seen as the appropriate tool to create business value. We recognize that innovation within an enterprise occurs in a framework of economic production and diffusion.

That framework is governed by (Porter’s) five major forces:

1. Customers Buying Power. Towards them must be oriented all the efforts of the firm, particularly concerning modifications of switching costs, manufacturing processes, or the positioning of the products and services. Innovation in the way the customer sees your industry or product may directly shift the balance of their buying power. Consider the commoditization of the flat panel TV industry as one area in which that balance has shifted in the space of a couple of years.

2. Suppliers Bargaining Power. Due to their huge power of negotiation, especially when they may be sole supplier in an innovative new industry sector, they are able to use their influence to shift supply chain economies causing disruption.

3. Threat of Substitute Products. Firms must pay attention to the threat of substitutes, and to the fact that followers do not have to support the R&D costs in the production process, and thus are able to implement the innovative service or product at a lower cost.

4. Threat of New Entrants. Anticipating and managing if necessary the different entry and exit barriers should be one of the major preoccupations of the firms operating on the market.

5. Intensity of Industry Competition. Rivalry among competitors has numerous consequences on the level of activity, as well as on the value chain, by increasing or lowering one or several structural elements of the market. Innovation may enable an enterprise to insulate from direct competition due to a technological advance for example.

This microcosm in which a firm survives requires constant surveillance and response as it continuously shifts and changes. What makes an awareness of these forces more important is that the timescale governing observation and impact has shifted; due to marketplace innovations the pace of change and rate of response has accelerated. The undercurrent at work here is that it is not enough to be aware of the environment in which innovation occurs; the effectiveness of the implementation of an innovation is critical. That is what drives economic growth.

It’s Not What You Know – It’s What You Do With What You Know
As a direct response to the neoclassical economics-fostered reasonable allocation of scarce resources, innovation economics focuses on spurring economic actors (the individual, the organization or firm, industries, cities, and even entire nations) to create value through increased productivity and implemented innovation. Innovation is a mighty lever for change and value creation. It disrupts existing systems and plays havoc with what we think we know, creating new paths for the exchange of goods, services but, more importantly, new ideas. It also provokes and promotes growth through expenditure.

Entrepreneurial profit is the expression of the value of what the entrepreneur contributes to production.
- Joseph Schumpeter

As new products are developed, new materials requiring new sourcing capabilities may be required. This creates employment opportunities, which impacts local communities. If those products become viable in the market, a whole microcosm of support is required to support the new endeavor. In the service sector, innovation practices create opportunities through the elimination of wasted time, freeing resources to be applied to other more fruitful activities. All of which is in support of value creation. Yet in order to achieve these ends innovators must forcing critical decisions in their organizations – what do we need to stop doing to make this innovation a reality? Without answering that question, innovation may become stuck.

To Make Something New You Might Need To Blow Something Up
In innovation economics, innovation lies at the center of value creation. Innovation economists recognize that innovation and productivity growth take place in the context of institutions. Indeed, it is the “social technologies” of institutions, culture, norms, laws, and networks that are so central to growth. In the eyes of conventional economists these are the elements that are too difficult to model or study. For a neoclassical economist, the focus is on the use of scarce resources to produce valuable commodities and distribute them among different people. Innovation economists view innovation as an evolutionary process in a market where firms act on imperfect information and where market failures are common.

Economic progress, in capitalist society, means turmoil.
- Joseph Schumpeter

Which leads us to one of the elder statesmen of innovation economics, Joseph Schumpeter. In his seminal work, The Theory of Economic Development (1911, 1934) Schumpeter did more than any other economist to increase the understanding of the role the entrepreneur plays in the capitalist economy. In particular, he defined the crucial role of the entrepreneur in the process of innovation and creative destruction – today it is virtually impossible to conceive of a dynamic capitalist economy in the absence of Schumpeterian entrepreneurs.

The startling thing is that Schumpeter also saw that the capability of the lone entrepreneur to significantly change the world would, over time, be supplanted by innovation through larger collaborative efforts. Schumpeter claimed that due to the application of modern techniques and modern modes of organization the innovation process would become more and more automated. Innovations would increasingly become the fruits of the organized effort of large teams. This would be done most effectively within the framework of large corporations.

Schumpeter foreshadowed, the destruction of the role of the solo inventor, and the subsequent rise of the “wisdom of the crowds” and “open innovation” before we even recognized the larger economic benefits of collaborative innovation. No matter how it is accomplished, Schumpeter clearly saw the case for the chaos and failure that innovation creates.

In fact, successful innovation is normally a source of temporary market power, eroding the profits and position of old firms (disrupting if not destroying their viability), yet ultimately each innovation succumbs to the pressure of new creations being commercialized by competing entrants. The creative destruction resulting from innovation practices is a powerful economic driver because it explains many of the dynamics of industrial change. The ongoing, dynamic transition from a competitive to a monopolistic market and back again, speaks to the impact of innovation economies.

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Innovation Is Not A Strategy

January 19, 2010 by Andrew (Drew) · Leave a Comment 

Why Blue Sky Thinking Does Not A Blue Ocean Make
Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.
- Sun Tzu

One Of These Things Is Not Like The Other
The confused merging of strategy (specifically strategy formulation) and innovation in business circles is alarming. Both strategic thinking and thinking about innovation require a disciplined approach, especially if we desire to improve our practice in either area over time. By conflating these two associated, yet separate concepts, we are denying the clear role that each plays in the ongoing success and health of an enterprise. Unfortunately, by positing that (re)separation we are swimming against the tide.

Strategy should provide a picture of the organization as it want to look in the future. Strategy is vision directed at what the organization should be, and not how the organization will get there. We define strategy as the framework which guides those choices that determine the nature and direction of an organization.- Charles Kepner & Benjamin Tregoe

While strategy, in its purest form, is a clear demarcation of what an enterprise wants to become as defined by what it will and will not do, innovation is different in that it is focused directly on the activities to create and enact something new. Does innovation tie to strategy? Absolutely. Strategy is an essential antecedent to innovation. Without it an organization’s resources may be miss-spent or wasted in fruitless pursuits. Strategy points the way and innovation is one of the ways in which its vision is accomplished.

The Desire To Swim In A Deep Blue Sea
One of the most compelling ways in which innovation may be seen to be directly derived from strategy may be found in the work of W. Chan Kim and Renee Mauborgne the authors of, Blue Ocean Strategy. In this book they describe a pattern of behavior identified in action over 100 years and across 30 industries in which strategy is driven not from “me-too-ism” but from truly unique differentiation. The companies they describe have successfully created “blue oceans” of uncontested market space priming themselves for growth. Such strategic practices, which the authors termed “value innovation,” have helped these companies build tremendous leaps in value for both themselves and their buyers; their actions render rivals obsolete and unleash hidden demand.

The kind of innovation that Kim and Mauborgne describe demands a fundamental understanding of the business that you are in to be able to develop a clear strategy to achieve your “blue ocean.” They propose a lens for assessing your business that is tied to a specific sequence of questions relating to: buyer utility (the reason why a mass of people might buy a product or service), price (its accessibility to buyers), cost (linking cost to produce to the profitability of your strategic price), and adoption (the hurdles to the business idea represented by the blue ocean.) Armed with answers to the questions they propose you can then determine where and how best to innovate.

We’re Going Down, Way Down
One of the primary tools for determining the level of investment as a result of the strategy formulation is a relatively simple nine box matrix called the Product / Market Matrix. This tool was originally developed by Igor Ansoff in 1957 in his article in the Harvard Business review titled, “Strategies for Diversification”. The matrix identifies a range of options for investment based on the core competencies of the organization. It facilitates deep introspection so that a commonly held vision of the organization’s key capabilities, critical concerns, and commitment to act can be understood. This tool allows an organization’s strategic stakeholders to essentially put the organization “on the couch” to conduct the business equivalent of a psychoanalysis and arrive at the truth of what is and is not feasible.

Within the Product/Market Matrix you can also clearly see where “blue oceans” might be found or created. Look to the bottom right of the matrix. You can also see how great the level of effort it may be to create a “blue ocean” from scratch in this context. It will require a significant commitment of the organization’s resources in order to make the desired market a viable reality. And that requires being able to answer the hardest question in strategy formulation…

What Won’t You Do?
The most important question that can be asked to test the limits and value of a strategy is,
“What won’t we do as we implement this strategy?” In the answer to that question lies the extent and value of the focus that strategy formulation represents. If the answer is, “Nothing. We will do anything,” then the strategy may be deemed to be worthless. All strategy formulation should enable the strategic stakeholders to clearly define what success looks like and what will be done to accomplish that goal.

The mark of a valuable strategy, one that will help you define the focus of your organization’s resources, time and energy, is one that more clearly tells you and your organization what you will not pursue. It tells you in which products and services to invest. This assessment of emphasis will also determine how much effort, resources, and commitment the organization will put behind specific parts of the business in order to achieve the strategy. It will set priority for your implementation efforts, including the innovation focus.

How Will You Get There From Here
Too many organizations confuse strategy and innovation. They conflate them unwittingly, or worse yet, don’t know the difference and treat them as interchangeable synonyms. That is simply not the case. One must follow the other. And they each require the other to be in place for them to be effective. Without a clear strategic framework to guide decision making and resource allocation most attempts to innovate will result in failure. And without the clear application of innovation thinking and execution, the likelihood of an organization’s strategic goals being attained is minimal at best.

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Want to Improve Your Innovation Culture? – Start by understanding organizational culture

January 6, 2010 by Andrew (Drew) · Leave a Comment 

Culture is a little like dropping an Alka-Seltzer into a glass-you don’t see it, but somehow it does something.
- Hans Magnus Enzensberger

What is Organizational Culture?
At its most basic, organizational culture is reflects the “personality” of the organization. Culture is the combination of the held assumptions, espoused values, practiced norms and physical artifacts of organization members and their behaviors. All of which exist at differing levels of visibility to an external observer. Members of an organization sense the particular culture of an organization when they witness these attributes over time. Culture, like comedy, is one of those terms that is difficult to express distinctly, but everyone recognizes it when they experience it. For example, the culture of a large, multi-national corporation is quite different than that of a local food bank which is quite different from that of a government agency. You can witness the culture of an organization by looking at the arrangement of furniture, hearing the stories they tell, observing what members wear, etc. — similar to the techniques you might use to get a sense of someone’s personality.

Culture is a real-time system
Corporate culture can be looked at as a system. Inputs include feedback from, e.g., society, professions, laws, stories, heroes, values on competition or service, etc. Commonly used words relating to the description of culture emphasize one of its most critical aspects – the notion that things within groups are shared or are commonly held and understood. The process of creating an organizational culture is based on our assumptions, values and norms, e.g., our values on money, time, facilities, space and people. Outputs or effects of our culture may be expressed as, e.g., organizational behaviors, technologies, strategies, image, products, services, appearance, etc. Essentially, organization culture is formed as the direct result of a group striving toward pattern-forming and integration in order to create a cohesive and shared meaning. Strong organization cultures reflect a fundamental human need for stability, consistency and a clearly defined operating mindset.

You want hard? Try changing an organization’s culture.
The concept of culture is particularly important when attempting to manage organization-wide change, including the adoption of new behaviors such as a stronger focus on innovation across the enterprise. Leaders and change management practitioners are coming to realize that, despite the best of intentions, organizational change must include not only changing structures, systems and processes, but also changing the corporate culture as well.

There’s been a great deal of literature generated over the past decade about the concept of organizational culture — particularly in regard to learning how to change organizational culture. Organizational change efforts are rumored to fail the vast majority of the time. Usually, this failure is credited to lack of understanding about the strong role of culture and the role it plays in organizations. That’s one of the reasons that many strategic planners now place as much emphasis on identifying strategic values as they do mission and vision. Another fundamental reason for failed organization change efforts is that organizational cultures are not monolithic.

A mosaic, often fractured, but beautiful
Distinct societies are composites of interacting subcultures rather than a single overarching culture. Organizations consist of subgroups that have specific characteristics and a sense of identification. Within organizations, people can easily classify themselves and others into various social categories or groups based on identification with their primary work group, occupational or professional skills, union membership, or age cohort. Subgroups in organizations can and do create subcultures that comprise specific networks of meaning; yet, at the same time, they remain associated with the ideologies and values of the organization’s leadership. The reason for this is that they exist within the climate created by culture-embedding mechanisms that support the entire organization’s over-arching culture and range of sub-cultures.

And this is where an innovation culture becomes manifest. Embedded within the higher-order or dominant culture of the organization will exist an approach to innovation that will exist as a sub-culture. Depending on the nature of the organization this may be strong and vital, or it may be weak or hamstrung. Future posts will address the ways to identify, surface and strengthen this sub-culture so that it may become a stronger and more vital part of the dominant organization cultural life.

Sources:
Schein 1992
Ouchi 1980, and Ashforth and Mael 1989

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On Projects and Innovation

December 21, 2009 by Andrew (Drew) · Leave a Comment 

“Don’t undertake a project unless it is manifestly important and nearly impossible.” – Edwin Land, founder of the Polaroid Corporation. Among other things, he invented inexpensive filters for polarizing light, a practical system of in-camera instant photography, and his retinex theory of color vision.

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