Tag Archives: Strategies

Want to Reach Latin American Consumers? Get Social

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By: Emily Stewart

For brands reaching out to Latin American consumers, social media is the way to go.

A study conducted by Ipsos OTX and Ipsos Global @dvisor found that internet users in Latin America and parts of Asia-Pacific tend to flock to brands’ social network pages, while users in more developed regions, such as Europe and the U.S., steer clear of corporate profiles.

In Brazil, 70% of consumers said that they were “very much” or “somewhat” likely to check brands’ social media pages regularly. In Mexico, 72% reported the same, and in Argentina, 64%. Just 12% of Brazilians and Mexicans said they were very unlikely to do so, and 20% of Argentines.

It seems that markets that are less digitally mature are more likely to interact heavily with brands through social media. Take, for example, Asia-Pacific. Internet users in India, Indonesia and China, where the internet market is still developing, were much more interested in brand social media pages than consumers in South Korea, Japan and Australia – more developed markets.

In Europe and North America, where the internet boasts a long-standing trajectory and high adoption rates, consumers also report paying little attention to brands on social media.

Explanations

emarketer offers a couple of explanations for this apparent correlation between internet adoption and brand social media interaction. It is possible, for example, that social networkers in developing internet markets are just more likely to be interested in brand social media offerings. Or, it may be the case that for new internet users, such offerings are new and exciting as opposed to old news.

However, in Latin America, something else may be at play. In terms of internet market maturity, Latin America isn’t exactly the newest kid on the block (emarketer projects that 46% of the region’s population will be internet users in 2013). This in mind, there’s probably another factor at play: Latin Americans like social media.

Latin Americans are among the top social media fanatics in the world, connecting and interacting at increasingly higher rates.

Reaching consumers via social networks is vital for success in the Latin American market – regardless of company size or sector. In fact, 52% of Latin Americans social media being a factor in their purchasing decisions.

Source: http://en.pulsosocial.com/2013/02/20/want-to-reach-latin-american-consumers-get-social/

Frugal Innovation: A New Business Paradigm

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By Navi Radjou and Jaideep Prabhu

GUEST COMMENTARY: What do Renault-Nissan, Siemens, and Unilever have in common? They are all pioneers of a groundbreaking business strategy called frugal innovation.

Frugal innovation is the ability to generate considerably more business and social value while significantly reducing the use of scarce resources. It’s about solving—and even transcending—the paradox of “doing more with less”. Frugal innovation is a game-changing strategy for an “Age of Austerity” in which firms are being compelled by cost-conscious and eco-aware consumers, employees, and governments to create offerings that are simultaneously affordable, sustainable, and of high quality. Even more than a strategy, frugal innovation is a whole new mindset, a flexible approach that perceives resource constraints not as a debilitating challenge but as a growth opportunity.

Paul Polman, the no-nonsense CEO of Unilever, is a corporate leader who strongly believes that resource scarcity can be a catalyst for radical innovation. He recognizes that, at our current rate of consumption, by 2030 we would need two planets to supply the resources we need and to absorb our waste. Polman wants Unilever to harness its brand reputation and scale to address this challenge. He has set a bold objective for Unilever to double its revenues by 2020 while reducing its environmental impact by 50 percent.

To implement his daring “do more with less” strategy, Polman is infusing frugality into all aspects of Unilever’s business. For instance, Unilever currently obtains nearly 25 percent of its agricultural raw materials from sustainable sources and uses lower-emission trucks to distribute its products. Meanwhile, its R&D teams are reformulating all its existing products like soaps and detergents to use less water and packaging and pollute less. Unilever has already introduced many frugal products in European countries hit hard by the economic crisis. In Spain, for example, Unilever is selling its Surf detergent in smaller packs for five washes only, and in Greece it now offers mayonnaise and mashed potatoes in smaller packages. The company has also introduced low-cost brands of tea and olive oil in European markets.

Frugal Innovation: The Secret Weapon of Emerging Markets

Unilever’s frugal offerings in Europe are inspired by emerging markets such as India, a country where the company has for years distributed soaps and shampoo in individual units or small sachets to millions of cost-conscious rural consumers.

Emerging markets such as India, China, Africa, and Brazil are a breeding ground for frugal innovation. In our book Jugaad Innovation, we show how inventive entrepreneurs and firms in emerging markets are able to innovate in resource-constrained settings and create frugal solutions that deliver more value to customers at lower cost. For instance, millions of Kenyans today rely on M-PESA, a service that enables them to save, spend, and transfer money using their cell phones without having a bank account. Likewise, SELCO provides solar energy at very low prices to over 125,000 households in remote Indian villages, debunking the myth that poor people can’t afford clean technology. Or take Gustavo Grobocopatel, an Argentinian farmer who overcame scarcity of land and skilled labour by subcontracting all farming work to networks of small firms. By scaling up his “asset-light” business model, Grobocopatel has boosted his agricultural output without adding more resources.

All these creative entrepreneurs in emerging markets share a unique mindset—which we call jugaad. Jugaad is a Hindi word meaning an innovative fix or an improvised solution born from ingenuity and cleverness. It is this jugaad mindset that enables these entrepreneurs to find opportunity in adversity and concoct frugal solutions using limited resources.

Shifting The Corporate Mindset In The West

In the end, frugal innovation is not just a drastically different way of innovating or even a radical new way of running a business—it is about fundamentally shifting the corporate mindset. As Albert Einstein famously stated: “One cannot solve a problem with the same mindset that created it in the first place.”

Western CEOs need to develop the jugaad mindset in their organisations so they can perceive scarcity as an opportunity to innovate and leverage employees’ ingenuity to create frugal solutions that offer greater value to customers at lower cost. These CEOs can emulate Unilever’s Paul Polman as well as Renault-Nissan’s Carlos Ghosn and Siemens’ Peter Löscher—visionary leaders who have successfully infused the jugaad mindset within their organisations.

Take Carlos Ghosn, the CEO of the Renault-Nissan Alliance. In 2006, Ghosn coined the term “frugal engineering”—inspired by Indian engineers’ ability to innovate cost-effectively (and swiftly) under extreme resource constraints. As Ghosn points out: “In the West, when we face huge problems and we lack resources, we tend to give up (too) easily. Jugaad is about never giving up!” Under Ghosn’s leadership, Renault-Nissan has proactively adopted frugal engineering—and the underlying jugaad mindset—and established itself as a major global manufacturer of both low-cost vehicles as well as electric cars—two of the fastest growing segments in the global automotive market.

In 2004, Renault launched Logan, an affordable, robust, and well-designed car priced at 5,000 euros (today it retails for US$10,000). The Logan has become Renault’s cash cow across recession-hit European markets as well as in many emerging economies. But Ghosn wants to do more. In 2012, he dispatched Gérard Detourbet, a senior executive from Paris who was running Renault’s entry-level car business, to India. From his new base in Chennai, Detourbet will design and build a “global small car”—a US$5,000 vehicle that will first be launched in India and then introduced in Brazil and South Africa. You can bet that when Detourbet returns to Renault’s headquarters in Paris, he will bring with him the frugal jugaad mindset he honed in India.

Siemens, the German industrial giant, is also leveraging the jugaad mindset of its R&D groups in India and China to develop frugal solutions that deliver higher value to customers. For instance, Siemens’ Indian engineers—in close collaboration with their German peers—have developed a Fetal Heart Monitor that uses inexpensive microphone technology rather than costly ultrasound technology. This affordable Fetal Heart Monitor is part of Siemens’ larger portfolio of frugal solutions labelled SMART (Simple, Maintenance-friendly, Affordable, Reliable, and Timely-to-market). SMART products are 40-60 percent cheaper than high-end solutions. They are also energy-efficient as well as quicker and easier to implement, use, and maintain. Siemens estimates there is a US$200 billion global market for SMART products. As Peter Löscher, CEO of Siemens, affirms: “Scarcity of resources is not an impediment but an enabler (of innovation).”

In coming years, we believe that more Western CEOs will adopt the jugaad mindset within their organisations—just as Paul Polman, Carlos Ghosn, and Peter Löscher have deftly done. In doing so, more Western firms will be able to innovate faster, better, and cheaper—and produce a steady stream of frugal solutions to delight value-conscious customers.

Navi Radjou (navi@naviradjou.com) is a Silicon Valley-based strategy consultant, a World Economic Forum faculty member, and a fellow at the University of Cambridge’s Judge Business School. Jaideep Prabhu (j.prabhu@jbs.cam.ac.uk) is the Jawaharlal Nehru Professor of Indian Business and Enterprise and Director of the Centre for India & Global Business at the University of Cambridge’s Judge Business School. Radjou and Prabhu are co-authors of the bestseller Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth (Jossey-Bass, 2012).

Source: http://knowledge.insead.edu/innovation/frugal-innovation-a-new-business-paradigm-2375

What really blocks innovation

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After a week at the beach over the holidays and a lot of time reflecting on innovation work, I thought it would be interesting to start the new year by writing about what blocks innovation.  I think much of what is written and said about the sclerotic nature of innovation activities focus on symptoms and not root causes.  Until we understand the underlying issues associated with innovation, it’s difficult to do innovation well, if at all.  Over the last four months we’ve had great success using the Executive Workmat with executive teams, helping them to understand the components of successful, sustained innovation.  But what’s become obvious as we’ve led workshops and discussions about the Workmat is that there are a number of hidden objections, concerns and disagreements about innovation in executive teams.  Until these issues are resolved, tools and methods won’t matter.  Training and certification are useless.  Even your interaction with third party consultants will suffer.

If there are a number of hidden or unspoken barriers or concerns about innovation, what are they, and how do we address them before trying to start innovation initiatives or projects?  I think there are four issues that block innovation but are often hidden from view:

  1. Executive alignment
  2. Uncertainty about near term and longer term objectives
  3. Resource allocation
  4. Don’t want to “go first” but don’t want to be “left behind”

Alignment

After countless business books, management philosophies, balanced scorecards and other means of obtaining executive alignment, you’d think that every organization is closely aligned to strategic goals and outcomes.  Where innovation is concerned, nothing is further from the truth.  When we talk to executive teams about innovation, its clear that there are very different perspectives, different goals and even different definitions between and among members of many executive teams.  What most executive teams are aligned to is obtaining the next quarter, staying within budget and driving up share price.  Anything that may call any of these objectives into question is anathema to the team.  While executives demand innovation, they hope it will happen in ways that do not disrupt the highly tuned “business as usual” operating models I described in Relentless Innovation.   Further, even when there is some agreement about the need for “innovation”, what is usually described as innovation is really incremental change at best, or continuous improvement.  Executive teams lack a common language and definitions about innovation, and limit their sights and definitions to incremental, internal and product-oriented innovation, rather than the breadth and depth of innovation potentials and outcomes that are possible and necessary.  The vision for innovation is cramped, cautious and serendipitous at best.

Uncertainty about objectives

Which is most important?  Obtaining short term goals or envisioning long term needs and objectives?  And what does “long term” mean anyway?  After years of right-sizing, most organizations have just enough people to accomplish the day to day work.  Pulling the best people from the day to day activities to focus on longer term innovation seems risky and dangerous.  Where should the teams place emphasis?  How much of the existing time, resource and focus should be placed on day to day efficiency?  How much should be focused on longer term objectives with less than certain outcomes?  If resources are reallocated to innovation, what should the team “Stop” doing?  Here lies the rub.  We all have limited resources and far more opportunities than we can pursue.  Which are the most important, and what should we “start” doing, and what should we “stop” doing in order to free up the resources necessary to innovate?  This question is probably the most difficult for many executive teams to answer.  Until there is clarity about objectives and they are placed in the correct balance by the CEO or other senior executives, the management team will revert to what is safe and predictable, and innovation will be starved for attention and resources.

Resource Allocation

As noted above, until the objectives are clear, little focus is placed on innovation, and resources are scarce.  But there’s more to this than simply creating more focus around objectives.  It’s not a matter of simply “more” resources, but a matter of the “right” resources at the right time.  Innovation demands the best people in the organization, not simply the people who are available or who can be freed up from their existing activities.  This is not a case where more bodies are necessary.  Innovation suffers unless the best people are involved.  When the most respected people are involved, the ideas seem less risky, they have the backing of the best people in the organization.  When people who enjoy less respect are involved in innovation, you send the signal that innovation is less important, and the ideas are more easily ignored.  What is the level of investment your team is willing to provide for innovation, not just in the number of people, but the caliber of the people?  You send a very powerful message as an executive team with the choices you make, both in terms of the number of people, as well as the type and caliber of people.  Think of it this way:  who on your team can you least afford to “give up” to an innovation activity?  If innovation is as important as we think it is, can you afford for them to not be on the team?

No pioneers but plenty of followers

No one wants to be the first to try out a new activity or methodology when so much is on the line, especially in organizations with highly efficient processes and limited resources.  So it can be very difficult to find an executive on the management team willing to take the plunge and start an innovation activity.  I’ve been fortunate enough to sit in on meetings where the CEO asks his or her team, “who wants to lead an innovation effort?” and the silence is overwhelming.  Everyone in the room recognizes the possibilities and the risks involved.  There’s a palpable sense of fear based mostly on concerns about “failing” to achieve a novel concept and also based on distracting the organization from their day to day activities.  Yet what is also interesting is that every executive wants as much investment and attention as the next one, so while no one wants to go first, most don’t want to go “last” or see another individual gain a lot of credibility because they were successful.  Don’t kid yourself, any executive team is a group of people who are at the top of their game, and who want every last resource they can obtain and every last opportunity they can pursue.  While innovation is risky, these executives don’t necessarily want to be the first to the plate, and definitely don’t want others to gain an inordinate about of credit for the success they may achieve.

Clarity, alignment, resourcing, leadership

Before asking your teams to innovate, examine the commitment and alignment of the executive team.  Sustained innovation can only occur when there is clarity about goals, alignment within the executive team to the goals, deep commitments to appropriate staffing and resource allocation, and the willingness to lead into risky or uncertain initiatives.  When these factors are present, innovation can flourish.  When any one is absent, innovation will suffer, because we tend to revert to safer, more familiar activities when we feel threatened.

Source: http://innovateonpurpose.blogspot.com/2013/01/what-really-blocks-innovation.html

The Future of Corporate Innovation and Entrepreneurship

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by steveblank

Almost every large company understands it needs to build an organization that deals with the ever-increasing external forces of continuous disruption, the need for continuous innovation, globalization and regulation.

But there is no standard strategy and structure for creating corporate innovation.

We outline the strategy problem in this post and will propose some specific organizational suggestions in follow-on posts.

I’m sitting at the ranch with Alexander Osterwalder, Henry Chesbrough and Andre Marquis listening to them recount their lessons-learned consulting for some of the world’s largest corporations. I offered what I just learned from spending a day at the ranch with the R&D group of a $100 billion corporation along with the insights my Startup Owners Manual co-author Bob Dorf who has several Fortune 100 clients.

(Full disclosure. I’m recovering from a reading spree of Chandlers Strategy and Structure, Gary Hamel’s The Future of Management and The Other Side of Innovation by Trimble and Govindarajan, Henry Chesbrough’s Open Innovation, as well as The Innovator’s DNA from Dyer, Gregersen and Christensen. So some or most of this post might be that I’ve overdosed on business books for the month.)

Collectively we’re beginning to see a pattern and we want to offer some concrete suggestions about Corporate Management and Innovation strategy and the structural (i.e. organizational) changes corporations need to make.

If we’re right, it will give 21st companies a way to deal with innovation – both sustaining and disruptive – as a normal course of business rather than by exception or crisis. Companies will be organized around Continuous Innovation.

Strategy and Structure in the 21st Century
While companies have existed for the last 400 years, their modern form is less than 150 years old. In the U.S. the growth of railroads, telegraph, meat packers, steel and industrial equipment forced companies to deal with the strategies of how to organize a complex organization. In turn, these new strategies drove the need for companies to be structured around functions (manufacturing, purchasing, sales, etc.)

90 years ago companies faced new strategic pressures as physical distances in the United States limited the reach of day-to-day hands-on management. In addition, firms found themselves now managing diverse product lines. In response, another structural shift in corporate organization occurred. In the 1920’s companies restructured from monolithic functional organizations (sales, marketing, manufacturing, purchasing, etc.) and reorganized into operating divisions (by product, territory, brand, etc.) each with its own profit and loss responsibility. This strategy-to-structure shift from functional organizations to operating divisions was led by DuPont and popularized by General Motors and quickly followed by Standard Oil and Sears.

GM 1925 org chart

General Motors Organization Chart ~1925

In each case, whether it was organizing by functions or organizing by operating divisions, the diagram we drew for management was an organization chart. Invented in 1854 by Daniel McCallum, superintendent of the New York and Erie railroad, the org chart became the organizing tool for how to think about strategy and structure.   It allowed companies to visually show command and control hierarchies – who’s responsible, what they are responsible for and who they manage underneath them, and report to above them.  (The irony is that while the org chart may have been new for companies, the hierarchies it described paralleled military organization and had been around since the Roman Legion.)

While org charts provided the “who” of a business, companies were missing a way to visualize the “how” of a business. In the 1990’s Strategy Maps provided the “How.” Evolved from Balanced Scorecards by Kaplan and Norton, Strategy Maps are a visual representation of an organization’s strategy. Strategy Maps are a tool to translate the strategy into specific actions and objectives to measure the progress of how the strategy gets implemented (but offer no help on how to create new strategies.).

Strategy Maps from Robert Kaplan

Strategy Maps from Robert Kaplan

By the 21st century, organizations still lacked a tool to create and formulate new strategies.  Enter the Business Model Canvas. The canvas describes the rationale of how an organization creates, delivers, and captures value (economic, social, or other forms of value). The canvas ties together the “who and how” and provides the “why”. External to the canvas are the environmental influences (industry forces, market forces, key trends and macro-economic forces.)  With the business model canvas in hand, we can now approach rethinking corporate innovation strategy and structure.

Business Model Canvas

Management Innovation in the 21st Corporation
Existing companies and their operating divisions implement known business models. Using the business model canvas, they can draw how their organization is creating, delivering, and capturing value. A business model for an existing company or division is not filled with hypotheses, it is filled with a series of facts. Operating divisions execute the known business model. Plans and processes are in place, and rules, job specifications, revenue, profit and margin goals have been set. Forecasts can be based on a series of known conditions.

BusinessModel Innovation in existing companies

Inside existing companies and divisions, the business model canvas is used as a tool to implement and continuously improve existing business models incrementally. This might include new products, markets or acquisitions.

A New Strategy for Entrepreneurship in the 21st Corporation

Yet, simply focusing on improving existing business models is not enough anymore. To assure their survival and produce satisfying growth, corporations need to invent new business models. This challenge requires entirely new organizational structures and skills.

This is not unlike the challenges corporations were facing in the 1920′s. Companies then found that their existing strategy and structures (organizations) were inadequate to respond to a changing world. We believe that the solution for companies today is to realize that what they are facing is a strategy and structure problem, common to all companies.

We propose that corporations equipped for the challenges of the 21st century think of innovation as a sliding scale between execution and search.

  1. For companies to survive in the 21st century they need to continually create a new set of businesses, by inventing new business models.
  2. Most of these new businesses need to be created outside of the existing business units.
  3. The exact form of the new business models is not known at the beginning. It only emerges after an intense business model design and search activity based on the customer development process.
  4. Companies will have to maintain a portfolio of new business model initiatives, not unlike a venture capital firm, and they will have to accept that maybe only 1 out 10 initiatives might succeed.
  5. To develop this new portfolio, companies need to provide a stable innovation funding mechanism for new business creation, one that is simply thought of as a cost of doing business
  6. Many of the operating divisions can and should provide resources to the new businesses inside the company
  7. We need a new organizational structure to manage the creation of new businesses and to coordinate the sharing of business model resources.
  8. Some of these new businesses might become new resources to the existing operating units in the company or they could grow into becoming the new profit generating business units of the company’s future.

Source: http://steveblank.com/2012/12/03/the-future-of-corporate-innovation-and-entrepreneurship/

Innovation is Action. So Get Up, Get Out, and just go be an Entrepreneur.

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Innovation is Action. So Get Up, Get Out, and just go be an Entrepreneur. by Dean DeBiase

After talking with hundreds of startup teams around the world, from the ones we are accelerating at 1871 in Chicago to a new stealth startup in India, I have found that, sometimes the best advice is to tell them to stop meeting so often at their favorite cafe/coffee shop, and instead, get out there and  work on the actual startup idea!  Waiting until everything is “just right”  can be a entrepreneurial trap. In reality, is OK to shift and pivot along the way–some of the most successful startups have. A great Sketchbook video from our friends at Kauffman Foundation puts this into a simple perspective…”just go be an entrepreneur”. Enjoy!

Source: http://www.innovationexcellence.com/blog/2012/12/01/innovation-is-action-so-get-up-get-out-and-just-go-be-an-entrepreneur/

Reclaim Your Creative Confidence

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By Tom Kelley and David Kelley

Most people are born creative. As children, we revel in imaginary play, ask outlandish questions, draw blobs and call them dinosaurs. But over time, because of socialization and formal education, a lot of us start to stifle those impulses. We learn to be warier of judgment, more cautious, more analytical. The world seems to divide into “creatives” and “noncreatives,” and too many people consciously or unconsciously resign themselves to the latter category.

And yet we know that creativity is essential to success in any discipline or industry. According to a recent IBM survey of chief executives around the world, it’s the most sought-after trait in leaders today. No one can deny that creative thinking has enabled the rise and continued success of countless companies, from start-ups like Facebook and Google to stalwarts like Procter & Gamble and General Electric.

Students often come to Stanford University’s “d.school” (which was founded by one of us—David Kelley—and is formally known as the Hasso Plattner Institute of Design) to develop their creativity. Clients work with IDEO, our design and innovation consultancy, for the same reason. But along the way, we’ve learned that our job isn’t to teach them creativity. It’s to help them rediscover their creative confidence—the natural ability to come up with new ideas and the courage to try them out. We do this by giving them strategies to get past four fears that hold most of us back: fear of the messy unknown, fear of being judged, fear of the first step, and fear of losing control.

Easier said than done, you might argue. But we know it’s possible for people to overcome even their most deep-seated fears. Consider the work of Albert Bandura, a world-renowned psychologist and Stanford professor. In one series of early experiments, he helped people conquer lifelong snake phobias by guiding them through a series of increasingly demanding interactions. They would start by watching a snake through a two-way mirror. Once comfortable with that, they’d progress to observing it through an open door, then to watching someone else touch the snake, then to touching it themselves through a heavy leather glove, and, finally, in a few hours, to touching it with their own bare hands. Bandura calls this process of experiencing one small success after another “guided mastery.” The people who went through it weren’t just cured of a crippling fear they had assumed was untreatable. They also had less anxiety and more success in other parts of their lives, taking up new and potentially frightening activities like horseback riding and public speaking. They tried harder, persevered longer, and had more resilience in the face of failure. They had gained a new confidence in their ability to attain what they set out to do.

We’ve used much the same approach over the past 30 years to help people transcend the fears that block their creativity. You break challenges down into small steps and then build confidence by succeeding on one after another. Creativity is something you practice, not just a talent you’re born with. The process may feel a little uncomfortable at first, but—as the snake phobics learned—the discomfort quickly fades away and is replaced with new confidence and capabilities.

Fear of the Messy Unknown

Creative thinking in business begins with having empathy for your customers (whether they’re internal or external), and you can’t get that sitting behind a desk. Yes, we know it’s cozy in your office. Everything is reassuringly familiar; information comes from predictable sources; contradictory data are weeded out and ignored. Out in the world, it’s more chaotic. You have to deal with unexpected findings, with uncertainty, and with irrational people who say things you don’t want to hear. But that is where you find insights—and creative breakthroughs. Venturing forth in pursuit of learning, even without a hypothesis, can open you up to new information and help you discover nonobvious needs. Otherwise, you risk simply reconfirming ideas you’ve already had or waiting for others—your customers, your boss, or even your competitors—to tell you what to do.

At the d.school, we routinely assign students to do this sort of anthropological fieldwork—to get out of their comfort zones and into the world—until, suddenly, they start doing it on their own. Consider a computer scientist, two engineers, and an MBA student, all of whom took the Extreme Affordability class taught by Stanford business school professor Jim Patell. They eventually realized that they couldn’t complete their group project—to research and design a low-cost incubator for newborn babies in the developing world—while living in safe, suburban California. So they gathered their courage and visited rural Nepal. Talking with families and doctors firsthand, they learned that the babies in gravest danger were those born prematurely in areas far from hospitals. Nepalese villagers didn’t need a cheaper incubator at the hospital—they needed a fail-safe way to keep babies warm when they were away from doctors who could do so effectively. Those insights led the team to design a miniature “sleeping bag” with a pouch containing a special heat-storing wax. The Embrace Infant Warmer costs 99% less than a traditional incubator and can maintain the right temperature for up to six hours without an external power source. The innovation has the potential to save millions of low-birth-weight and premature babies every year, and it came about only because the team members were willing to throw themselves into unfamiliar territory.

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Tackling the Mess, One Step at a Time

by Caroline O’Connor and Sarah Stein Greenberg

You can work up the confidence to tackle the big fears that hold most of us back by starting small. Here are a few ways to get comfortable with venturing into the messy unknown. The list gets increasingly challenging, but you can follow the first two suggestions without even leaving your desk.

1. Lurk in online forums. Listen in as potential customers share information, air grievances, and ask questions—it’s the virtual equivalent of hanging around a popular café. You’re not looking for evaluations of features or cost; you’re searching for clues about their concerns and desires.

2. Pick up the phone and call your own company’s customer service line. Walk through the experience as if you were a customer, noting how your problem is handled and how you’re feeling along the way.

3. Seek out an unexpected expert. What does the receptionist in your building know about your firm’s customer experience? If you use a car service for work travel, what insights do the drivers have about your firm? If you’re in health care, talk to a medical assistant, not a doctor. If you make a physical product, ask a repair person to tell you about common failure areas.

4. Act like a spy. Take a magazine and a pair of headphones to a store or an industry conference (or, if your customers are internal, a break room or lunch area). Pretend to read while you observe. Watch as if you were a kid, trying to understand what is going on. How are people interacting with your offering? What can you glean from their body language?

5. Casually interview a customer or potential customer. After you’ve gotten more comfortable venturing out, try this: Write down a few open-ended questions about your product or service. Go to a place where your customers tend to gather, find someone you’d be comfortable approaching, and say you’d like to ask a few questions. If the person refuses? No problem, just try someone else. Eventually you’ll find someone who’s dying to talk to you. Press for more detail with every question. Even if you think you understand, ask “Why is that?” or “Can you tell me more about that?” Get people to dig into their own underlying assumptions.

Caroline O’Connor is a lecturer at the Hasso Plattner Institute of Design. Sarah Stein Greenberg is its managing director.

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Another example comes from two students, Akshay Kothari and Ankit Gupta, who took the d.school’s Launchpad course. The class required them to start a company from scratch by the end of the 10-week academic quarter. Both were self-described “geeks”—technically brilliant, deeply analytical, and definitely shy. But they opted to work on their project—an elegant news reader for the then–newly released iPad—off-campus in a Palo Alto café where they’d be surrounded by potential users. Getting over the awkwardness of approaching strangers, Akshay gathered feedback by asking café patrons to experiment with his prototypes. Ankit coded hundreds of small variations to be tested each day—changing everything from interaction patterns to the size of a button. In a matter of weeks they rapidly iterated their way to a successful product. “We went from people saying, ‘This is crap,’” says Akshay, “to ‘Is this app preloaded on every iPad?’” The result—Pulse News—received public praise from Steve Jobs at a worldwide developer’s conference only a few months later, has been downloaded by 15 million people, and is one of the original 50 apps in Apple’s App Store Hall of Fame.

It’s not just entrepreneurs and product developers who should get into “the mess.” Senior managers also must hear directly from anyone affected by their decisions. For instance, midway through a management off-site IDEO held for ConAgra Foods, the executives broke away from their upscale conference rooms to explore gritty Detroit neighborhoods, where you can go miles without seeing a grocery store. They personally observed how inner-city residents reacted to food products and spoke with an urban farmer who hopes to turn abandoned lots into community gardens. Now, according to Al Bolles, ConAgra’s executive vice president of research, quality, and innovation, such behavior is common at the company. “A few years ago, it was hard to pry my executive team away from the office,” he says, “but now we venture out and get onto our customers’ home turf to get insights about what they really need.”

Fear of Being Judged

If the scribbling, singing, dancing kindergartner symbolizes unfettered creative expression, the awkward teenager represents the opposite: someone who cares—deeply—about what other people think. It takes only a few years to develop that fear of judgment, but it stays with us throughout our adult lives, often constraining our careers. Most of us accept that when we are learning, say, to ski, others will see us fall down until practice pays off. But we can’t risk our business-world ego in the same way. As a result, we self-edit, killing potentially creative ideas because we’re afraid our bosses or peers will see us fail. We stick to “safe” solutions or suggestions. We hang back, allowing others to take risks. But you can’t be creative if you are constantly censoring yourself.

Half the battle is to resist judging yourself. If you can listen to your own intuition and embrace more of your ideas (good and bad), you’re already partway to overcoming this fear. So take baby steps, as Bandura’s clients did. Instead of letting thoughts run through your head and down the drain, capture them systematically in some form of idea notebook. Keep a whiteboard and marker in the shower. Schedule daily “white space” in your calendar, where your only task is to think or take a walk and daydream. When you try to generate ideas, shoot for 100 instead of 10. Defer your own judgment and you’ll be surprised at how many ideas you have—and like—by the end of the week.

Also, try using new language when you give feedback, and encourage your collaborators to do the same. At the d.school, our feedback typically starts with “I like…” and moves on to “I wish…” instead of just passing judgment with put-downs like “That will never work.” Opening with the positives and then using the first person for suggestions signals that “This is just my opinion and I want to help,” which makes listeners more receptive to your ideas.

We recently worked with Air New Zealand to reinvent the customer experience for its long-distance flights. As a highly regulated industry, airlines tend toward conservatism. To overcome the cultural norm of skepticism and caution, we started with a workshop aimed at generating crazy ideas. Executives brainstormed and prototyped a dozen unconventional (and some seemingly impractical) concepts, including harnesses that hold people standing up, groups of seats facing one another around a table, and even hammocks and bunk beds. Everyone was doing it, so no one was scared he or she would be judged. This willingness to consider wild notions and defer judgment eventually led the Air New Zealand team to a creative breakthrough: the Skycouch, a lie-flat seat for economy class. At first, it seemed impossible that such a seat could be made without enlarging its footprint (seats in business and first-class cabins take up much more space), but the new design does just that: A heavily padded section swings up like a footrest to transform an airline row into a futonlike platform that a couple can lie down on together. The Skycouch is now featured on a number of Air New Zealand’s international flights, and the company has won several industry awards as a result.

Fear of the First Step

Even when we want to embrace our creative ideas, acting on them presents its own challenges. Creative efforts are hardest at the beginning. The writer faces the blank page; the teacher, the start of school; businesspeople, the first day of a new project. In a broader sense, we’re also talking about fear of charting a new path or breaking out of your predictable workflow. To overcome this inertia, good ideas are not enough. You need to stop planning and just get started—and the best way to do that is to stop focusing on the huge overall task and find a small piece you can tackle right away.

Best-selling writer Anne Lamott expertly captures this idea in a story from her childhood. Her brother had been assigned a school report about birds, but he waited to start on it until the night before it was due. He was near tears, overwhelmed by the task ahead, until his father gave him some wise advice: “Bird by bird, buddy. Just take it bird by bird.” In a business context, you can push yourself to take the first step by asking: What is the low-cost experiment? What’s the quickest, cheapest way to make progress toward the larger goal?

Or give yourself a crazy deadline, as John Keefe, a d.school alum and a senior editor at radio station WNYC, did after a colleague complained that her mom had to wait at city bus stops never knowing when the next bus would come. If you worked for New York City Transit and your boss asked you to solve that problem, how soon would you promise to get a system up and running? Six weeks? Ten? John, who doesn’t work for the transit authority, said, “Give me till the end of the day.” He bought an 800 number, figured out how to access real-time bus data, and linked it to text-to-speech technology. Within 24 hours, he had set up a service that allowed bus riders to call in, input their bus stop number, and hear the location of the approaching bus. John applies the same fearless attitude to his work at WNYC. “The most effective way I’ve found to practice design thinking is by showing, not telling,” he explains.

Another example of the “start simple” strategy comes from an IDEO project to develop a new dashboard feature for a European luxury car. To test their ideas, designers videotaped an existing car and then used digital effects to layer on proposed features. The rapid prototyping process took less than a week. When the team showed the video to our client, he laughed. “Last time we did something like this,” he said, “we built a prototype car, which took almost a year and cost over a million dollars. Then we took a video of it. You skipped the car and went straight to the video.”

Our mantra is “Don’t get ready, get started!” The first step will seem much less daunting if you make it a tiny one and you force yourself to do it right now. Rather than stalling and allowing your anxiety to build, just start inching toward the snake.

Fear of Losing Control

Confidence doesn’t simply mean believing your ideas are good. It means having the humility to let go of ideas that aren’t working and to accept good ideas from other people. When you abandon the status quo and work collaboratively, you sacrifice control over your product, your team, and your business. But the creative gains can more than compensate. Again, you can start small. If you’re facing a tough challenge, try calling a meeting with people fresh to the topic. Or break the routine of a weekly meeting by letting the most junior person in the room set the agenda and lead it. Look for opportunities to cede control and leverage different perspectives.

That’s exactly what Bonny Simi, director of airport planning at JetBlue Airways, did after an ice storm closed JFK International Airport for a six-hour stretch in 2007—and disrupted the airline’s flight service for the next six days. Everyone knew there were operational problems to be fixed, but no one knew exactly what to do. Fresh from a d.school course, Bonny suggested that JetBlue brainstorm solutions from the bottom up rather than the top down. First, she gathered a team of 120 frontline employees together for just one day—pilots, flight attendants, dispatchers, ramp workers, crew schedulers, and other staff members. Then she mapped out their disruption recovery actions (using yellow Post-it notes) and the challenges they faced (using pink ones). By the end of the day, Bonny’s grassroots task force had reached new insights—and resolve. The distributed team then spent the next few months working through more than a thousand pink Post-its to creatively solve each problem. By admitting that the answers lay in the collective, Bonny did more than she could ever have done alone. And JetBlue now recovers from major disruptions significantly faster than it did before.

Our own experience with the open innovation platform OpenIDEO is another case in point. Its launch was scary in two ways: First, we were starting a public conversation that could quickly get out of hand; second, we were admitting that we don’t have all the answers. But we were ready, like Bandura’s phobics, to take a bigger leap—to touch the snake. And we soon discovered the benefits. Today, the OpenIDEO community includes about 30,000 people from 170 countries. They may never meet in person, but together they’ve already made a difference on dozens of initiatives—from helping revitalize cities in economic decline to prototyping ultrasound services for expectant mothers in Colombia. We’ve learned that no matter what group you’re in or where you work, there are always more ideas outside than inside.

For people with backgrounds as diverse as those of Akshay, Ankit, John, and Bonny, fear—of the messy unknown, of judgment, of taking the first step, or of letting go—could have blocked the path to innovation. But instead, they worked to overcome their fears, rediscovered their creative confidence, and made a difference. As Hungarian essayist György Konrád once said, “Courage is only the accumulation of small steps.” So don’t wait at the starting line. Let go of your fears and begin practicing creative confidence today.

Tom Kelley is the general manager of IDEO and the author of The Ten Faces of Innovation (Currency/Doubleday, 2005). He is an executive fellow at UC Berkeley’s Haas School of Business and at the University of Tokyo. David Kelley is the founder and chairman of IDEO and the founder of the Hasso Plattner Institute of Design at Stanford, where he is the Donald W. Whittier Professor in Mechanical Engineering.

Source: http://hbr.org/2012/12/reclaim-your-creative-confidence/ar/1

Restarting the US small-business growth engine

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NOVEMBER 2012 • John Horn and Darren Pleasance

Source: Strategy Practice

Reinvigorating small business starts with identifying the high-growth firms that disproportionately drive economic activity and jobs. In an accompanying video, AOL cofounder Steve Case explains how big businesses can benefit too.

There’s mom. There’s apple pie. And there’s small business. As the US economy struggles to go on climbing out of the downturn and create jobs, no hero stands taller in the nation’s political and business psyche than the small-business owner. With good reason. Small businesses, defined as companies with fewer than 500 employees, account for almost two-thirds of all net new job creation. They also contribute disproportionately to innovation, generating 13 times as many patents, per employee, as large companies do.1

Sadly, small-business optimism is at its lowest levels in almost 20 years.2 After crashing in the recession, confidence remains below any level recorded since the early 1990s, because the recovery has been so anemic. Had small business come out of the recession maintaining just the rate of start-ups generated in 2007, the US economy would today have almost 2.5 million more jobs than it does.

What’s particularly disturbing is that the greatest decline in entrepreneurial activity occurred in the 18–24-year-old cohort. While older entrepreneurs bring more experience and a higher likelihood of success to their business building, the shortage of young business founders means that the US economy is currently not producing enough of its next generation of serial entrepreneurs.

The recent US presidential campaign made much of the need to restart the US small-business engine, which won’t be easy. But one place to begin, our research suggests, is to focus more sharply than usual in today’s economic debate on two things: precisely how small business contributes to growth and job creation, and the ways the private sector—not just government—can support that job creation dynamic. (For more, view this video interview with Steve Case, chairman and CEO of Revolution and cofounder of America Online, or download a PDF of the edited transcript.)

On entrepreneurship: A conversation with Steve Case
The chairman and CEO of Revolution and cofounder of AOL explains why small, high-growth companies are the secret to economic vitality and job creation and how large companies could benefit from them.

A vast universe

While the small-business universe is vast, its real economic impact comes disproportionately from a much smaller subset of high-growth firms. These firms, our research shows, can more or less double their revenues and employment every four years. And they are everywhere, in every industry sector (exhibit) and in far more geographies than is commonly thought.

Of course, many entrepreneurial firms fail, and that too is part of the DNA of small business, so it is routinely impossible to predict which will succeed. That’s why understanding how this high-performing cohort works is important to restoring the confidence and job creation potential of small business.

Of course, government too plays an important role in the way it fosters entrepreneurs and applies regulation. But government assistance is not the only answer. We believe that large businesses can do more—much more—to support small business, both within and outside of their own organizations. In the process, they can make themselves more flexible and add new strategic options.3 To understand why, let’s first dispel some myths about US small business to better understand the contours of a sector that includes more than 99 percent of all employer businesses.

Myth #1. All small businesses want to grow.

Not all owners of small businesses want them to grow; many “mom and pop” enterprises are happy to stay small. It is really a subset of young businesses—those less than five years old—that do want to grow and that create the majority of jobs: 40 million over the last 25 years. This represents 20 percent of total gross job creation and total net new job creation in the United States over this time period.

Myth #2. All small businesses are equally valuable to job creation in the economy.

Small businesses in general are valuable for the US economy and provide flexibility and valuable services. But a subset of small businesses—high-growth ones—creates the vast majority of new jobs. Seventy-six percent of these high-growth firms are less than five years old. The 1 percent of all firms that are growing most quickly (fewer than 60,000 in all) account for 40 percent of economy-wide net new job creation. To provide a sense of magnitude, high-growth firms add an average of 88 employees a year, while the average non-high-growth company only adds 2 to 3.

Myth #3. High-growth firms come from high-tech locales.

Conventional wisdom suggests looking for high-growth firms in areas like Silicon Valley or the Route 128 corridor outside Boston, where many well-known ones have emerged. However, our look at a broad spectrum of companies shows that all industries have high-growth firms. While sectors do vary somewhat, in no industry do high-growth firms account for even 5 percent of the total number of firms in the industry, and there are very few industries where less than 1 percent of firms are growing quickly. In the United States, high-growth firms are found in every metropolitan statistical area, and no region has a disproportionate number of them. Conversely, Silicon Valley has many firms that struggle to grow and never become breakout stars, as well as many smaller companies that have no desire to grow quickly.

Myth #4. Taxes and regulation are small business’s primary constraint.

Many business leaders will tell you that taxes and regulation are the biggest barriers to starting up and enlarging small businesses. It’s true that some regulations and laws have inhibited the growth of small businesses; the Sarbanes–Oxley Act, for instance, had the unexpected consequence of discouraging some companies from making initial public offerings, a step typically followed by a burst of hiring.4 But taxes and government oversight are not the primary barriers to stimulating the growth of small businesses. In the latest recession, their owners pointed to a lack of market demand as the primary problem, as well as an inability to obtain financing.5

Meet the high-growth leaders

What are these high-growth entrepreneurial firms? Many are storied names from Silicon Valley: Google, Hewlett-Packard, Intel, and others. But many high-growth firms are neither in high tech nor based in Silicon Valley. Consider Under Armour, which has grown to take on adidas and Nike in the global sports apparel industry. In the 1990s, founder Kevin Plank, a former football player from the University of Maryland, set out to find a shirt that would keep athletes cooler. After developing one, he would drive up and down the East Coast with the shirts in his trunk and sell them to high-school and college players. Eventually, word of mouth generated a company with revenues of almost $1.5 billion.

Or consider Scentsy, an Idaho company that sells wickless and flameless scented candles. Through multiple outlets (online, home parties, catalog sales), Scentsy has raised its revenue from about $75 million in 2008 to $382 million in 2010, right through the depths of the recession. Or HubSpot, a Cambridge, Massachusetts, firm that provides marketing software to other small and midsize businesses, thus growing by helping other entrepreneurial companies to grow.

Nurturing high-growth businesses

The sectoral and geographic diversity of high-growth enterprises naturally lends itself to discussions of support by federal, state, and local governments. Such steps can effectively cut regulatory red tape, refine tax laws, address immigration laws, and streamline patent procedures. For example, the recently passed JOBS6 Act should encourage firms to launch IPOs, by streamlining red tape, raising limits on soliciting private investors, and providing new funding sources.

Public-sector leaders should examine the policies that limit the growth of entrepreneurial small companies, as well as those that could spur it. But the private sector—and larger businesses, in particular—have a bigger role to play than is generally acknowledged. In fact, we believe that larger businesses should think more broadly and creatively about supporting and mentoring entrepreneurs, spurring demand for the products and services their businesses supply, and providing creative financing to tap mutually beneficial growth opportunities.

Changing mind-sets

Perhaps the most important starting point for large businesses is to change their mind-set regarding small-business entrepreneurs. Too many larger businesses rigidly view them as direct competitors, intent on dethroning large companies from leadership positions. Granted, this is sometimes true. However, in our experience many more vibrant entrepreneurs operate in complementary industries and are often overlooked as suppliers. By supporting burgeoning entrepreneurs, leaders of large businesses can help this critical segment of the economy while providing additional flexibility and options for their own organizations.

Consider, for example, a large health care provider that helps support high-tech software service providers in its area, to make such potential suppliers more effective and efficient. This approach could help build an emerging cluster, which would encourage the development of a larger and better labor pool, as well as more competition for the products and services sold by the suppliers. It would probably also help make large companies in the cluster more efficient and thus better able to stay ahead of their competitors, including the entrepreneurs.

Yet in one roundtable discussion with a group of entrepreneurs, we heard several of them mention that they find it particularly challenging to locate the right representatives at larger companies. One related a story about trying to take a software solution to a larger company after learning publicly that it was seeking just such an offering. When the entrepreneur called to discuss his idea, however, he was first directed to the business-development group, which focused on mergers and acquisitions. A second attempt landed him in the purchasing department, which required him to go through procurement channels before getting a contract. All this took place before he could even determine whether his idea really was the answer to the larger company’s problem.

One way around this issue would be for larger companies to staff a small department that interacts with prospective entrepreneurs to develop better intelligence about their activities. Typically, a large company’s purchasing group has specific product-buying guidelines; there is no reason a similar (but different) group couldn’t be assigned to assess external solutions to challenges that the large company identifies on an ongoing basis.

In fact, some companies do look for innovations outside their walls—for instance, Cisco and P&G, though they focus mostly on acquisitions. InnoCentive, by contrast, is an entrepreneurial firm that helps companies connect with external problem solvers. Whether large companies execute such strategies internally or outsource them, these companies could all be more flexible and adaptable if they increased their connections with smaller businesses that could fill missing capabilities through arm’s-length contracts, joint ventures, or acquisitions.

More mentoring

Another approach leaders of large companies could use more often would be to improve their mentoring of entrepreneurs. Mentoring is one area of support that entrepreneurs find most helpful, yet most difficult to obtain. In particular, a large company could set up a program to mentor current employees planning to start their own businesses—for example, suppose an internal team wants to pursue an offering that wouldn’t meet the company’s hurdle rate but could be profitably developed by a start-up and would benefit the company itself. Such a program could stimulate creative thinking within the company, create new ideas that stayed within it, and help budding entrepreneurs know if their ideas were ready for implementation. For the large companies, it would be more likely to provide new suppliers than direct competitors. Effective mentoring can also build a stronger, more experienced labor pool.

Naturally, people who have lived the experience of starting up and maintaining a firm provide the best mentorship to budding business leaders. It can take the form of assistance with writing business plans, sharing a large company’s experience, and supporting more tactical needs, such as how to get legal advice, as well as accounting and administrative tasks. Large businesses also have a role to play here. American Express OPEN’s small-business support program, Victory in Procurement, has been running a group-mentoring and training program for the past few years as part of an initiative to help entrepreneurs respond to government procurement requests. As part of the program, some participants receive 12 hours of interaction with government contracting experts. And Cisco’s Entrepreneur Institute provides knowledge and business solutions to entrepreneurs. Its Web site details several success stories.

Spurring demand

More than in previous downturns, small entrepreneurs cite a lack of demand—final consumer demand or demand from other businesses—as their primary obstacle: they believe they have good products or services but just can’t find enough customers. Since the supply chains of large companies include many small, entrepreneurial businesses, the large companies could specifically look for them when seeking new business partners. Of course, not all supply chain decisions should be made this way, but if a large business does find a local partner that is more economical, shortens the supply chain, and provides quicker turnarounds, the choice should be a no-brainer.

Studies of clusters lend credibility to the idea of supporting small suppliers in complementary industries. These clusters, such as Silicon Valley in high tech or Research Triangle Park in biotech, have long been regarded as one of the keys to strong economic development. Clusters are desirable because they are self-sustaining innovation machines. The companies in a cluster continually try to out-innovate each other to stay ahead. Their proximity promotes the exchange of ideas that spark new innovations, and they are a natural magnet for talent. But while many countries (and locations across the United States) have tried to replicate the Silicon Valley model, few have succeeded.

When Michael Porter and colleagues studied the impact of clusters on job growth, they found that those comprising more than one sector (for instance, health care and high tech) experienced the fastest growth rates. The United States currently has a broad variety of clusters, and many are interdisciplinary in nature.

More and better financing

Venture capital funding has been shifting to later-stage investments over the past decade, partly because the market for IPOs has declined. Meanwhile, it’s tougher for smaller businesses, as well as many larger ones, to get even the traditional financing they need. Supplier financing is an area where large businesses can help entrepreneurs. By paying some contracts earlier than existing terms require, a large business can cut a small supplier’s working-capital costs. This should be regarded as a short-term support program, not necessarily as an across-the-board, long-term commitment. It isn’t essential to change the terms for every company, but selectively targeting those that need some short-term financing support could be an easy form of aid, especially if it doesn’t materially change the large company’s working capital.

Although the recent downturn hit the US small-business and entrepreneurial segment hard, the trend can be reversed. The public sector has a role, but the private sector must lead where it can develop new and creative solutions, as well. It is often in the interest of larger organizations to foster and encourage smaller ones, especially where everyone can benefit. Not all of the steps a large business can take will produce tomorrow’s Apple or Under Armour—but they’ll improve the chances.

About the Authors

John Horn is a senior expert in McKinsey’s Washington, DC, office, and Darren Pleasance is an alumnus of the Silicon Valley office.

Source: http://www.mckinseyquarterly.com/Strategy/Growth/Restarting_the_US_small_business_growth_engine_3032

The Global Innovation 1000: Making Ideas Work

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The early stages of innovation can be challenging. But Booz & Company’s annual study of R&D spending reveals that successful innovators bring clarity to a process often described as fuzzy and vague.

by Barry Jaruzelski, John Loehr, and Richard Holman

Every economic downturn comes with the same refrain: The world, we’re told, is losing its creative capacity, hurting our chances for a speedy recovery. Yet inevitably, when worries about innovation erosion surface, some company rises up with a great new product, technology, or service to prove the naysayers wrong. And all too often, observers simply fail to pay attention to the many companies that make successful innovation part of their regular practice — indeed, their operating model — in ways that don’t necessarily make big headlines.

Those companies are the quiet stars of our annual Global Innovation 1000 study of R&D spending. As our study has consistently shown over the past eight years, there is no long-term correlation between the amount of money a company spends on its innovation efforts and its overall financial performance; instead, what matters is how companies use that money and other resources, as well as the quality of their talent, processes, and decision making. Those are the things that determine their ability to execute their innovation agendas. In 2011, corporate spending among the Global Innovation 1000 increased 9.6 percent over the previous year, slightly faster than the 9.3 percent gain in 2010. But because corporate revenues grew by a robust 13 percent last year — even faster than the year before — R&D intensity, or the percentage of sales that companies spend on innovation, actually declined to traditional pre-recession levels.

Of course, some companies get more bang for their innovation investment buck than others. Over the past few years, we have carefully analyzed the innovation strategies, capabilities, and cultural factors that enable some companies to consistently achieve superior financial results. This year, to further clarify those performance drivers, we surveyed nearly 700 companies and interviewed 12 senior innovation executives and chief technology officers at leading companies. Our goal was to gain insights into the early stages of innovation — when companies generate ideas and then decide which ones to develop.

2012 Global Innovation 1000 Study

 Authors Barry Jaruzelski and John Loehr discuss the results of the Global Innovation 1000 study, focusing on the “fuzzy front end” of the innovation process.

The Up-Front Process Revealed

Perhaps the most surprising result of our study of the up-front innovation process is how many companies say they simply aren’t very good at it. Just 43 percent of participants said their efforts to generate new ideas were highly effective, and only 36 percent felt the same way about their efforts to convert ideas to product development projects. Altogether, only a quarter of all respondents indicated that their organizations were highly effective at both. (See Exhibit 1.)

“If you have a creative idea and it doesn’t create value,” says Matthew Ganz, vice president and general manager of research and technology at the Boeing Company, “it’s not technology. It’s art. If you’re all about value creation with no creativity, the accountants are going to take over. You need to prime the pump with creative ideas, and then you need to have rigorous processes in place to turn those ideas into dollars.”

The second critical finding calls into question a common assumption about innovation. It’s often said that the means by which companies seek out and find good ideas tend to be vague, or fuzzy, or highly variable from one company to another. Yet according to our survey, the most successful innovators in all industries have developed a variety of consistent, manageable ideation practices that are well aligned with their innovation strategies. And when moving ideas into the development stage, they tend to depend on an equally consistent set of principles and processes. Indeed, any company in any industry can take advantage of these tools and processes to get the most out of the money they spend on innovation.

The types of techniques and tools they employ, however, depend in large part on each company’s favored innovation strategy (although these distinctions are more pronounced in the ideation stage). A great deal of the work we have done in the annual Global Innovation 1000 studies over the past several years has involved teasing out the different ways companies approach innovation, and the implications of those approaches. Five years ago, our research showed that nearly every company follows one of three fundamental innovation strategies, each of which has its own distinct way of managing the innovation process and its relationship to customers and markets. We thus categorize companies as Need Seekers, Market Readers, or Technology Drivers.

Need Seekers, such as Apple and Procter & Gamble, make a point of engaging customers directly to generate new ideas. They develop new products and services based on superior end-user understanding. Their goal: to seek out both articulated and unarticulated needs, and then to try to get their new products to market first.

Market Readers, such as Hyundai and Caterpillar, use a variety of means to generate ideas by closely monitoring their markets, customers, and competitors, focusing largely on creating value through incremental innovations to their products. This implies a more cautious approach, one that depends on being a “fast follower” in the marketplace.

Technology Drivers, such as Google and Bosch, depend heavily on their internal technological capabilities to develop new products and services. They leverage their R&D investments to drive both breakthrough innovation and incremental change, in hopes of meeting the known and unknown needs of their customers via new technology.

As in the past, our results this year suggest that following a Need Seekers strategy, although difficult, offers the greatest potential for superior performance in the long term. Fifty percent of respondents who defined their companies as Need Seekers said their companies were effective at both the ideation and conversion stages of innovation, compared with just 12 percent of Market Readers and 20 percent of Technology Drivers. These are the same companies, by and large, that consistently outperform financially.

It is critical to remember, however, that companies can significantly outperform their peers no matter which of the three strategies they follow. A far more critical factor is how well they follow their chosen innovation strategy: Is it tightly aligned with their overall business strategy? Have they put in place the innovation capabilities needed to support their strategy? Do they have the right corporate culture needed to make that strategy work? And are they using the tools and processes that will yield the best new ideas and development projects, consistent with their innovation model? Companies that can coherently align all these aspects of the innovation process, and execute them well, have a distinct advantage in the race for new ideas, products, and services.

The Lightbulb Moment

Where do ideas come from? That seemingly simple question is at the heart of the initial phase of innovation, when companies try to capture the best thinking about how to create breakthrough products and services that might transform their position in the marketplace, as well as the incremental improvements to their current product portfolios that can refresh tired brands. Few companies succeed at innovation without ensuring that adequate processes are in place to generate new ideas, and that those processes are followed in a disciplined fashion. Yes, serendipity will always play some part in the effort, and we’ve heard plenty of stories over the years about great ideas evolving out of chance meetings, sudden flashes of insight, and sheer luck. Large companies, however, simply can’t depend on happenstance, and the most successful ones understand that clearly.

In the past, large companies typically turned to a highly “vertically integrated” innovation model, in which most of their new ideas stemmed from internal sources; an archetypical example is the old AT&T, whose Bell Labs conducted groundbreaking research, and, together with Western Electric, developed many of the ideas and products that now define our networked world. (See “Innovation at Bell Labs,” by Edward H. Baker.) More recently, companies have turned to a wider range of sources for ideas, from suppliers and customers to outright acquisition of companies with good ideas in their own pipeline.

All these laudable efforts have led many companies to say, at least anecdotally, that coming up with new ideas is not as big a problem as selecting and converting them to development projects, and the survey results and interviews validate this hypothesis. Darlene Solomon, chief technology officer of measurement company Agilent Technologies, and CEO Bill Sullivan use the term cloud of innovation to refer to the large number of early-stage ideas available for potential investigation. Most of those ideas, Solomon says, “aren’t yet sufficiently formulated for businesses to decide to take them to product. There are always more ideas we want to invest in than we can realistically move through the life cycle, but it is these fragile ideas that seed future breakthrough products.”

Still, considering that 57 percent of respondents say their company is just marginally effective at idea generation, and a similar proportion say their company’s culture does not support efforts to come up with new ideas, it is clear that many companies have much to learn about the best processes for generating ideas. Moreover, companies’ level of effectiveness at this early stage of innovation turns out to be a strong predictor of financial performance. The 25 percent of survey respondents who said their company was highly effective at both ideation and conversion also reported outperforming their industry peers on three important financial measures: revenue growth, market cap growth, and earnings as a percentage of revenue. The same held true for companies whose employees said their culture supported early-stage innovation efforts. (See Exhibit 2.)

However, our survey also revealed that there is no correlation between financial performance and the particular processes companies use at the idea-generation and idea-conversion phases. Overall, companies continue to depend on a set of long-standing, reliable methods for coming up with new ideas. The most common method, by a substantial margin, was “direct observations of customers,” ranked number one by 42 percent of all respondents. “Traditional market research” was a rather distant second, at 31 percent. We also looked at the kinds of external networks companies turned to at the ideation stage; again, the most common was talking to customers, followed by working with channel partners. Finally, when asked what internal mechanisms their company used, most respondents pointed to “innovation champions” — people assigned to coordinate the capture, development, and internal promotion of new ideas — followed by “cross-functional collaboration” among different business units.

Another noteworthy survey finding is the limited use of open innovation in idea generation. In the past decade or so, the concept of open innovation has generated a great deal of buzz, and a small but growing number of companies are seeking out new ideas from a variety of sources outside their conventional domains, including innovation contests and social networking. However, less than 15 percent of all companies ranked mining social media for ideas and using open innovation as important. We see indications of why some companies see value in the techniques while others are left cold. Companies in more consumer-oriented industries, including software and Internet, computing and electronics, consumer, telecom, and some healthcare sectors, are twice as likely to employ social media in their search for new ideas than are companies in sectors with more highly engineered products and services, such as auto, industrials, aerospace, and chemicals and energy, where these methods seem to have less efficacy.

Different Strategies, Different Tools

In our survey, and in follow-up interviews, we asked respondents about the mechanisms and processes their company employed, as well as the degree to which they depended on both internal and external networks. Clearly, several ideation techniques are common to all innovators, but by and large, companies seem to focus on the tools and processes that are most aligned with their chosen innovation strategies. In each of the areas critical to early-stage innovation, the initial capturing of ideas and the process by which companies decide to move their good ideas into the product development process, we find considerable variation. (See Exhibit 3.)

Need Seekers. These companies understand the importance of developing strong relationships with customers — they rely more heavily on customer observation than do companies that follow either of the other two strategies, and less on pure market research. Indeed, Need Seekers’ reliance on mechanisms that can provide deep insights into the end-users of their products goes beyond their willingness to observe customers directly; they also depend more on customer focus groups and “idea workout” sessions than do Market Readers or Technology Drivers. Further, they are more likely to leverage social networking (10 percent say they use it) and deep analytics involving customer data.

According to the survey, Need Seekers also make avid use of internal networks — especially those involving innovation champions. Indeed, on an indexed basis, Need Seekers are much more likely than companies following the other two strategies to put people into this role, and even more likely to see such champions as an effective element of their ideation processes. Cross-unit staffing, formal idea conferences, and communities of practice are also popular among them; in fact, companies classified as Need Seekers use all these internal network structures at higher rates, and view them as more effective as well.

Externally, Need Seekers tend to rely on networks of customers, followed by their channel partners and suppliers. Again, Need Seekers use these networks more consistently than the other two groups and also see the networks as being more effective. Says Tom Kavassalis, vice president of strategy and alliances at the Xerox Corporation, “We call what we do customer-led innovation, and its whole purpose is to make sure that our innovation process is really relevant to customers. We frequently host customers at our R&D centers and have them talk about what keeps them up at night, and where they think technology might be helpful. We look for customers who are risk takers, willing to be the guinea pig in the deployment of a new solution. In exchange for them giving their insights into their needs, we give them the opportunity to be an early adopter of something really new.”

In their search for new ideas, Need Seekers frequently cast their nets wide. Douglas Smith, chief technology officer at the Timken Company, notes that for its first 100 years, this machine components manufacturer “was a closed innovation shop. If the research didn’t happen inside our four walls, then it didn’t happen in any of our plants or in any of our engineering areas. Over the past decade, we’ve come to appreciate that there are lots of other good, smart companies and exceptional talent out there. We’re developing new ways to tap into other pools of knowledge — from customers and suppliers to universities and third-party companies. We find that we can create the best value when we complement our internal scientific knowledge with external perspectives and approaches. Having an operating model that aligns the right access to new ideas at the right cost and the right risk creates a win-win situation for both parties.”

Market Readers. These companies face a different strategic challenge. Their goal is to find ideas that lie within their business expertise, which they can then develop into incrementally improved products to take to market quickly and efficiently. They thus tend to focus on the further development of products that have already been introduced by competitors. Market Readers are the most likely of the three to rely on traditional market research to understand better what is already working in their markets. And they are significantly more likely than the others to turn to their customer support and sales teams for ideas about how they can improve the products they already have. This feedback loop between sales and R&D is critical for Market Readers, but companies that rely too much on it may find themselves with a new-product portfolio heavily weighted toward incremental improvements — a strategy that can work, although it depends greatly on the company’s ability to carry it out as efficiently as possible.

Market Readers depend less on networks of every kind than do either Need Seekers or Technology Drivers — which may be a further effect of the sales/R&D feedback loop. As a rule, they tend to find communities of practice and focused innovation networks effective in generating ideas, which is perhaps symptomatic of their determination to ensure rapid delivery of new products into the market. And when going outside the company for ideas, they are more likely than Technology Drivers to depend on their customer and supplier networks, but less likely to depend on universities and government agencies for new ideas, than companies following either of the other innovation models.

Tana Utley, chief technology officer of Caterpillar Inc., underscores why engagement with customers is crucial: “I’ve seen organizations let their engineers showcase technology ideas and develop some of them, but the innovation that results is often not directed to solving customers’ most pressing problems. If it doesn’t relieve a particular customer pain point, then there’s no compelling case to pull it through all the gates into production. As we develop projects, especially areas of new technology, we engage customers. And by the time we get the product out to them, it’s something that they can use in their business.”

Technology Drivers. These companies take a generally more self-reliant, inward-looking approach, impelled largely by their desire to develop new products based on the latest advances in technology. The key is to gain a broad understanding of what’s possible, and to use that understanding to direct their own R&D.

Technology Drivers’ forays into the market also include regular external idea and technology scouting. These companies depend to a greater extent on internal mechanisms such as regular meetings of their own experts, communities of practice across company business units, and technology road mapping, to develop far-reaching ideas that go beyond anything the market could suggest.

“Consumers don’t always know what is possible,” says Girish Nair, senior vice president of corporate strategy and alliances at Hewlett-Packard. “They can describe what they want, but they can’t know what the technology can do, especially because what the technology can do changes rapidly. You have to create it, show that it can be done, and then iterate.”

The risk for Technology Drivers is that their ideas and products, which reflect a highly technological imperative, may not be fully attuned to markets and customers. According to the survey, many of them do little to mitigate this risk in their use of ideation tools. Indeed, like Need Seekers, they rank innovation champions as the most common and effective internal networking mechanism. But Technology Drivers use such champions at a considerably lower rate. They also turn less frequently to the top outside networks — customers, channel partners, and suppliers — than do either Need Seekers or Market Readers.

From Ideas to Products

The process of choosing which ideas to convert to full-scale product development is perhaps even more critical to a company’s innovation success than is the ideation stage. The conversion stage is the point at which companies use all the processes and tools at their command to decide whether a given idea in the pipeline is a “go” or a “no go.” In the view of many innovation experts, this is where the most value is added. Says John Evans, corporate vice president for technology and innovation at the Lockheed Martin Corporation: “The conventional financial metrics appear to say that most of the value is created in the last steps of a project: development and commercialization. But those steps are the most expensive and risky. I believe that it’s this middle conversion phase, which we call investigation, where the value of a project can go up by a factor of 10.”

Most companies maintain data on their conversion rates, and on the rate at which products in development ultimately find their way into the marketplace. Overall, 43 percent of survey respondents said their company converted fewer than 20 percent of its ideas to development projects, and just 12 percent reported moving more than 60 percent into development.

These numbers, however, don’t really reflect the attitudes of innovators toward the number of ideas that ought to be generated, and the percentage of projects that should not be further developed. In this regard, company size matters. Our survey results show that the smaller companies in the Global Innovation 1000 (the companies ranked 101 to 1,000) report themselves to be twice as effective at the conversion stage as their largest peers (the companies ranked in the top 100), no doubt because the organizational issues are less complex, and ultimately less bureaucratic.

Compared with the processes and tools used at the ideation stage, those used at the conversion stage do not vary much among the three strategies. Three-quarters of all companies, for instance, depend on internal networks for help in vetting ideas for further development — an unsurprising result given that most companies, even Need Seekers, simply do not go far afield for conversion of their ideas, and some might even see going afield as a risk. The only external mechanism that many companies report using is “leading customer reviews,” in which top customers are given an early glimpse into the development pipeline. This tool is most popular among Market Readers, perhaps because their general cautiousness prompts them to double-check whether their products will succeed in the marketplace given existing alternatives.

Yet the true key to success at the conversion stage isn’t the specific tools and mechanisms used — after all, companies report that, by and large, they all use quite similar processes. The key to success is for companies to have the right people in place to manage the process, using experience and judgment to rigorously make the needed decisions. Says Solomon of Agilent: “Our pipeline is about how much we think a technology can move the needle in creating value for our customers, and usually, that’s not a numbers question when you are assessing a disruptive technology. It’s easy to make anything look good. [What matters is] the judgment of people who are very experienced in leading research, and we are fortunate to have really smart people who have a good combination of technology and business sense.”

That combination is critical when deciding which ideas to carry through to commercialization and which to kill. As ideas and projects move down the pipeline, business considerations become increasingly important. “In managing the research portfolio that is in the labs’ funnel,” says Solomon, “we constantly ask ourselves, ‘What have we learned about the technology that makes it more or less attractive than [it was] six months ago? What have we learned about the market, the competitive technologies — and what’s going on in the world that might help us decide whether the technology is now even more valuable or perhaps becoming a “me-too” technology? What has changed within Agilent in terms of our business priorities?’ All of these perspectives evolve over the course of our longer-range research, and influence our decision whether or not to continue to invest in a particular project.”

Achieving R&D Success

Of course, even the best business management cannot overcome poor decisions about which ideas to move into development, or add significantly to value if the idea itself isn’t strong. Thus, the quality of those early ideas, and of the ones pushed past the conversion stage, is critical. To ensure good decision making, executives need to make use of the processes and techniques best suited to their chosen innovation strategy, and put the right people in place to execute on them.

As the business environment becomes ever more competitive, the need to innovate successfully becomes ever more acute. Says Utley of Caterpillar: “There is nothing like a powerful external market force to really drive an intense innovative environment. And there is nothing that drives creative energy like that feeling in the pit of your stomach when you have a goal that you have to achieve and it’s still pretty far away.” Harness that energy as you move forward with your innovation efforts, taking comfort in the fact that your performance during the crucial front end can be much more consistent and manageable than you thought possible.

Profiling the Global Innovation 1000

Worldwide R&D spending among the Global Innovation 1000 increased 9.6 percent in 2011, to US$603 billion. Coming on the heels of last year’s rise in spending, this makes it clear that we have emerged from the latest financial crisis with a stronger commitment to innovation investment than we did after the dot-com meltdown in 2000. In the first three years following that collapse, innovation spending increased at an annual rate of 3.5 percent, compared with 9.5 percent between 2009 and 2011. Yet despite this significant growth, average R&D intensity (innovation spending as a percentage of sales) actually declined one-tenth of 1 percent in 2011, because the Global Innovation 1000 generated sales of a staggering $17.6 trillion last year. (See Exhibit A.)

The top 100 companies accounted for 50 percent of the growth in R&D spending, and now represent 62 percent of the total spent on R&D by the Global Innovation 1000. Overall, three-quarters of companies increased their spending, up from 68 percent in 2010, whereas just 19 percent spent less. The top 20 spenders increased their innovation investments by $5 billion, accounting for just under 13 percent of the overall increase. (See Exhibit B.)

Together, the computing and electronics, healthcare, and auto sectors once again accounted for the majority of overall spending — 65 percent in 2011. (See Exhibit C.) Computing and electronics companies continued their reign as the top R&D spenders, accounting for 28 percent of spending worldwide ($167.2 billion), as well as the largest increase in spending during 2011. The industry increased its spending by $13.4 billion last year. (See Exhibit D.) This investment represents a 7.1 percent increase, and with revenues up just 3.5 percent, the sector’s R&D intensity rose from 6.1 percent to 6.5 percent. Samsung led the way, increasing its R&D spending almost 14 percent, to $9 billion, and raising its ranking to number six in the list of the largest spenders overall. As computing power moves into the cloud and consumers turn to less-expensive devices, sales of traditional electronics products such as PCs and digital cameras are slowing. It’s no surprise, then, that large, incumbent companies like Sony, Hewlett-Packard, and Texas Instruments have increased their R&D intensity in hopes of staying relevant.

Thanks largely to the auto sector’s strong recovery, spending on R&D in this industry increased by 15 percent, to a total of $96.5 billion, which was a far cry from the sector’s 14 percent spending cut in 2009. R&D intensity rose from 3.7 percent in 2010 to 3.8 percent in 2011. After falling to sixth place in the overall rankings in 2010, Toyota increased its spending by 16.5 percent and claimed the top spot. All the auto companies among the top 20 spenders in 2010 either moved up in the rankings or stayed the same in 2011, and Daimler entered the top 20 for the first time. Innovation remains critical for auto companies as they seek to meet ever more stringent fuel economy standards, boost the use of electronics in their cars, develop common platforms around the globe, and attract younger buyers.

Meanwhile, as its increase in absolute spending slowed in 2011, the healthcare industry’s R&D intensity dropped by three-tenths of 1 percent, to 12.2 percent, even though it continues to spend significantly on R&D ($126 billion in 2011). Of the eight healthcare companies in the top 20 spenders in 2010, all but Novartis and Sanofi fell in the rankings in 2011. Given the recent dearth of successful major pharmaceutical product introductions, many healthcare companies are hesitant to continue investing in innovation, choosing instead to steer profits to shareholders. Regulatory uncertainty has also taken its toll: Large pharma companies appear reluctant to invest in R&D without a clearer path to market.

Every region where Global Innovation 1000 companies are headquartered increased spending in 2011, although the results varied considerably. (See Exhibit E.) The biggest absolute gains were in North America, where companies increased spending by 9.7 percent, significantly above their five-year average increase of 7 percent. Similarly, Japan increased spending by 2.4 percent, well above its five-year average increase of 0.2 percent. Europe, however, increased spending by just 5.4 percent, somewhat below its 6.8 percent average increase, likely a result of the region’s continued economic woes.

China and India (grouped together here) increased spending by 27.2 percent in 2011, to a total of $16.3 billion — by far the greatest growth in R&D spending across all regions, albeit from a small base. Because China’s economy is much larger than India’s, and far more of its companies appear in the Global Innovation 1000 (47 companies, compared with just nine from India), China accounted for more than 90 percent of the countries’ combined spending. However, it is worth noting that their combined rate of growth was down from 38.5 percent in 2010, which may reflect the cooling down of the Chinese economy over the past year.

With an increase in spending in nearly every industry and geographic market, investment in R&D among the Global Innovation 1000 is now at an all-time high. Just a few years after the financial crisis gripped the world economy, today it is safe to say that global innovation investment has fully recovered — and is at a higher level than ever.

—B.J., J.L., and R.H.

The 10 Most Innovative Companies

For the third year in a row, we asked our survey participants to name the companies they thought were the world’s most innovative. This year, Apple didn’t just top the rankings (as it did the past two years); it increased its lead substantially. The company — which in August 2012 became the most valuable in history, measured by market capitalization — was named by almost 80 percent of respondents as one of the three most innovative companies in the world, up from 70 percent last year. Google held steady at number two; 43 percent of respondents included it among the top three, essentially unchanged from last year. 3M also maintained its position of high regard among respondents. It may not make headlines often, but the company again took third place, capturing the votes of just more than 15 percent of respondents. (See Exhibit F.)

Apple’s unchallenged position comes in a year marked by the death of the company’s founder and chairman, Steve Jobs, and by the absence of any truly new product introductions. Although the company’s absolute spending on R&D over the past three years has nearly doubled, to US$2.4 billion, it still spends just 2.2 percent of its sales on its innovation efforts, well below the average of 6.5 percent for the computing and electronics sector. And despite being one of the 2011 industry sales leaders in 2011, with $108 billion in revenue, Apple’s absolute R&D spend ranks only 16th within its industry and 53rd overall within the Global Innovation 1000. In contrast, Apple’s longtime rival Microsoft was the top spender in the software and Internet sector, and was ranked by respondents as the sixth most innovative company.

Last year’s sole newcomer to the list was Facebook. But that was back when the company was still rapidly growing its user base, and before its ill-fated initial public offering. The bloom may be off the rose for this erstwhile social media darling. Amazon has replaced Facebook in the number 10 position on the most innovative list. It’s about time that the online retailer appeared; although Amazon makes few products of its own, it consistently develops innovative retail strategies and services. The Kindle was the first breakthrough e-reader, but what made it truly innovative was Amazon’s decision to link it so tightly to its e-book business, effectively cutting out the competition. And Amazon’s foray into cloud computing, despite a few setbacks, continues to attract customers and increase revenues.

The 10 most innovative companies handily outperformed the top 10 spenders on R&D on several financial metrics — market cap growth, revenue growth, and earnings as a percentage of revenues (after normalizing for industry variations). (See Exhibit G.) Indeed, this year’s top 10 spenders actually underperformed in terms of both market cap and revenue growth, compared with their industry peers. And were it not for new entrant Amazon’s slim margins, the top innovators would have vastly outperformed their peers on earnings as a percentage of revenues. This only confirms our long-standing finding that a company’s financial performance and innovativeness do not correlate with how much it spends on R&D, but rather with how well it executes its innovation strategy.

—B.J., J.L., and R.H.

Author Profile:

  • Barry Jaruzelski is a senior partner with Booz & Company in Florham Park, N.J., and the global leader of the firm’s engineered products and services business. He created the Global Innovation 1000 study in 2005, and continues to lead the research. He works with high-tech and industrial clients on corporate and product strategy and the transformation of core innovation processes.
  • John Loehr is a partner with Booz & Company based in Chicago, and is the global leader of the firm’s innovation practice. He works with automotive, industrial, and technology companies to help them build competitive innovation capabilities and to resolve critical decisions in their product and market strategies.
  • Richard Holman is a partner with Booz & Company based in Florham Park, N.J. As a senior leader of the firm’s innovation practice, he works with clients in highly engineered products sectors such as aerospace, industrials, high tech, and healthcare on innovation capability building, new product development efficiency and effectiveness, and product management.
  • Also contributing to this article were s+b contributing editor Edward H. Baker and Booz & Company

Source: http://www.strategy-business.com/article/00140?pg=all

Training Is Innovation Accelerant

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By Gregg Fraley

I’ve neglected to write about a critically important aspect of creativity and innovation —  the value of training.

Creativity and innovation training is a highly effective accelerant for business results.

And yes, you can train creativity. And by the way, if you want brainstorming that works – don’t skip training. Much of the research that says brainstorming doesn’t work (ahem) studied groups with no training.

You can also train people in the fuzzy front end of innovation. That difficult bit of  invention that analysis can’t quite solve on its own is especially challenging for corporations. Training can make a big difference in bridging the gap between market knowledge and… what could be.

You’ll see immediate and positive results with creativity training. Min Basadur did a rigorous study, see here, and that’s not the only proof. Individuals learn how to think and express ideas in a more positive, focused, and free flowing way with certain types of creativity training. Teams achieve breakthrough results when properly facilitated through through a rapid, flexible, but structured process at the front end of innovation.

Creativity training feeds innovation process like wood wool feeds flame.

The creative training many experts advocate is structured Creative Problem Solving training (CPS, aka ‘Osborn-Parnes model’) and Front End of Innovation process training (FEI). CPS is a time-tested framework. Many innovation consultants use CPS or their own modified versions of CPS (see my business novel about CPS, Jack’s Notebook.) FEI process training is about how to conduct and orchestrate a series of activities that happen before the classic stage-gate/pipeline of new product development. Stage-gate is in the textbooks. FEI training is being done, but is relatively obscure. CPS training is generally more available — but not ubiquitous.

Sadly, it’s notable that as an innovation budget line item it is often left out entirely, or, it’s the first sacrificial lamb to be cut. It should be the first thing done, because creativity and innovation training accelerates innovation in five strategic ways:

  1. Improved creative thinking leads to enhanced innovation capacity, and with action, results.
  2. Training helps instil structured creative thinking and innovation process as a cultural value and habit.
  3. CPS and FEI training provide innovation teams with a common language and framework to solve problems, improve communication, expedite complex problem resolution, and moving new business concepts forward.
  4. Training corrects many of the myths that surround creativity and innovation. There is a science to this that is largely ignored. For those that learn and practice the science — it’s a competitive advantage.
  5. Team efficiency improves because a lot of useless chatter, debate, and conflict is eliminated.

One of the reasons creativity training  is not more commonly done is that there is a misconception that you can’t train creativity. If you think of it as complex problem solving you can indeed train it and improve performance — dramatically so. Creativity is an innate human capacity that is squeezed out of us over time. You can put it back in the tube!

Creativity is intimately related to change, decision making, and problem solving — it’s not just artistic self-expression.

So here’s the teaching point. If you are in charge of an innovation program or initiative, do the training first. For you, and then your team. All activities that happen afterwards will be performed at a higher level, and from day one. Imagine creativity applied to research, platform question framing, idea generation, concept development, and management presentations. Imagine an innovation framework your team can get better and better at…

Training is the fuel for innovation fire.

Source: http://www.greggfraley.com/blog/2012/10/20/training-as-innovation-accelerant/

7 Innovation Myths and Realities

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By Rieva Lesonsky | Business on Main
7 Innovation Myths and Realities -- Business on Main -- © Hero/Fancy/Corbis

Do you think the greatest innovators are first to market? Or that true innovation is too risky for small businesses? We debunk some of the biggest myths about innovation.

Do you believe innovation always comes in a flash of inspiration? Do you assume great innovators work alone? Well, you’re wrong. “[Myths like these] may make it easier for our brains to comprehend innovation, but believing them is kind of like believing in magic,” says Braden Kelley, an innovation speaker and trainer and co-founder of Innovation Excellence. In fact, warns Kelley, falling for these myths can keep you from turning a promising idea into a valuable innovation.

Here’s the truth about seven of the most common innovation myths.

Myth 1: Inspiration comes in a flash. “Everyone’s heard about Newton and the apple, or Archimedes and the bathtub, and assumes that innovation arrives in a flash of brilliance. It’s not so,” says Kelley, the author of “Stoking Your Innovation Bonfire.”

Tip: Don’t expect a “Eureka moment” to fall in your lap. Insight may come, but expect to work hard for it. “There’s always a lot of inspiration, investigation, ideation and iteration before you arrive at that moment,” Kelley says, “and a lot of implementation, illumination and installation work to be done afterwards to turn a brilliant invention into a widely adopted innovation.”

Myth 2: Your idea has to be groundbreaking. “If you dig up the history of most successful companies, you’ll find there were many competitors chasing the same idea,” says Scott Berkun, best-selling author of “The Myths of Innovation.” “Ford wasn’t the only company making cars. Apple wasn’t the only company making digital music players. The winning difference was their ability to execute, and focus on decisions that mattered most to customers.”

Tip: “The greatest asset a business owner can have is a clear eye for understanding customers and studying their biggest problems and frustrations,” says Berkun. “Don’t worry about ideas that feel big. Worry instead about ideas that solve your customers’, or your competitor’s customers’, biggest complaints and frustrations.” Develop those solutions and you just might find yourself labeled a “breakthrough innovator” after all.

Myth 3: Innovation is all about products. “There are many types of innovation, including service innovation, business model innovation and design thinking,” says Chuck Frey, founder of InnovationManagement and InnovationTools, an online resource for innovation, creativity and brainstorming. “I recommend that small-business owners broaden their views of what innovation is, and how and where it can be employed in their organizations.”

Tip: Stop focusing on creating “cool products” and start looking around your business for ways to streamline your processes, modify your customer service, update your business model, create better packaging or change your delivery channels.

Myth 4: Great innovators work alone. Whether it’s Steve Jobs, Thomas Edison or Alexander Graham Bell, “we love the romantic idea of the lone innovator,” Kelley says, “but history tells a different story. Innovation is a team sport — how many people work at Apple?”

Tip: Take a cue from the so-called “lone innovators” (like Bell and Edison, who built commercial labs to pursue their innovations) and surround yourself with people who possess the skills you lack. With a strong team behind you, you’ll stand a far better chance of making your innovation a success.

Myth 5: You’ve got to innovate fast. “People assume that being fast to market with a potential innovation is a determining factor in its success,” says Kelley. “In fact, most great innovations have taken 20 or 30 years from the point of invention to wide adoption.”

Tip: “Don’t rush to commercialization just because [you] have created something of value,” warns Kelley. “Innovation is all about value, and value creation is just one component.” Often, he says, you must spend even more time on value access (making it easy for people to obtain the innovation) and value translation (explaining the innovation’s value) in order to launch a successful innovation.

Myth 6: Innovation is too risky for my business. Yes, failed innovations can be costly for small businesses. “One big product failure can literally kill a small company,” says Frey. “There’s no margin for error.” On the other hand, he asks, “What’s the alternative? Do nothing and maintain the status quo until your competitors leave you in the dust?”

Tip: To lessen your risk, Frey suggests taking a portfolio approach. “A venture capitalist knows only one out of every 10 startups in which he invests will eventually be profitable, but he doesn’t know which one,” Frey explains. “So the VC invests incrementally in each firm, gradually redeploying funds as some of the startups flame out and steadily investing more money in the most promising ideas — without having to bet the farm on any one of them.” Apply this strategy to your portfolio of ideas, and you can nurture the most promising ones while minimizing risk.

Myth 7: I can’t afford to innovate. If you think your small business lacks the money and manpower to innovate, you’re suffering from a fundamental misunderstanding of innovation. “Innovation doesn’t have to be a disruptive, game-changing initiative,” Frey says. “Pursuing incremental innovation helps you grow without taking on unnecessary risk. In fact, having resource constraints often forces you to be more creative.”

Tip: If you’re short on manpower, consider hiring college students to help, using crowdsourcing to invite outsiders to contribute ideas, or partnering with other small businesses. “If you want to be innovative, you can,” Frey says, “no matter what the size of your firm and the resource constraints you may face.”

Remember: “The magic of innovation happens in completely different ways — a collaborative way, a systematic way,” says Kelley. “This means there’s hope for all of us.”

Source: http://businessonmain.msn.com/browseresources/articles/inventingandnewideas.aspx?cp-documentid=254068562&wt.mc_id=msnmoney#fbid=lsxMSjiX_XD