What is Innovation?

In a HBR blog post, Scott Anthony asks What’s Stopping Innovation? Of more interest is his attempt to define what is innovation:

When I use the word innovation, I think of three interlocking components:

* Insight or inspiration suggesting an opportunity to do something different to create value

* An idea or plan to build an offering based on that insight or inspiration

* The translation of that plan into a successful business (in simple terms, commercialization)

The senior leaders I talk to believe that the bulk of their innovation challenges lie in the first two components. I suspect this is because the third piece looks like execution, and of course, large organizations know all about execution. And yet, my field experience suggests that it’s this third component, not the first two, that actually blocks innovation

As we have noticed several times (Invention vs. Innovation, CEOs want more creativity, BCG Innovation Study and Ideation Tools), lack of clear innovation definition leads to many incorrect conclusions about how and when to drive innovation. Furthermore, a unclear definition also leads to indeterminate metrics for innovation. Without clear metrics, it becomes difficult to measure innovation.

The author is quite right about execution preventing realization of the benefits of innovation. There have been many articles about open innovation and reverse innovation. However, implementation of innovation from outside the R&D organization (even a sister division of the same company) is fraught with not-invented-here problems. R&D managers need to be quite clear in their plans on benefiting from access to outside innovation.

Another problem I have seen repeatedly is lack of funding for converting innovative ideas or plans into delivered products. Many innovative ideas come from research arms of R&D organizations. There is always a tension because of researcher ideas that might impact funding for or sales an existing product line. In many cases, the innovative ideas suffer because of inherent risk and the clout of product managers. What have you seen?

The Secret Reason Your Employees Won’t Innovate

HBR lays out The Secret Reason Your Employees Won’t Innovate:

After surveying hundreds of employees ranging from managers to stock clerks, Feirong Yuan of the University of Kansas and Richard W. Woodman of Texas A&M found that worries about “image risks” (unfavorable social impressions) significantly diminish workers’ innovativeness. People whose roles don’t explicitly call for innovation believe that coworkers will think negatively of them if they try to come up with better ways of doing things. In some cases, they’re even afraid they’ll “provoke anger among others who are comfortable with the status quo,” Yuan says.

We have discussed some of the reasons why R&D team members are reluctant to put forward new ideas: Risk averseness and misaligned incentives. Clearly something R&D managers should be consciously changing:

But leaders can have a big impact on this problem, the researchers report in the Academy of Management Journal. Perceived organizational support for innovation significantly reduces workers’ view of the social riskiness. The key is to create a sense of psychological safety: Provide an environment in which differences are tolerated and people feel free to approach problems in new ways.

Are Companies Protecting the Wrong R&D Investments? – Scott Anthony – Harvard Business Review

An older HBR article talks about Are Companies Protecting the Wrong R&D Investments.

An article in Monday’s Wall Street Journal suggests that many executives understand this dynamic. The Journal found that R&D spending at 28 large U.S. companies dropped a mere 0.7 percent in the dismal fourth quarter of 2008.

Is maintenance of R&D budgets a good thing? We have found a couple of examples (TI and FreeScale) that leveraged the downturn to eliminate low return R&D projects from the pipeline. There is also some evidence that R&D spending does not automatically guarantee profits. This article reinforces that theme – use downturn to evaluate and prune the R&D project pipeline, but do not focus exclusively on near-term projects because that will have a negative long-term impact on competitiveness.

Research by Innosight Board member Clark Gilbert found that when companies perceive a threat, they tend to become very rigid in their response. The very act of “protecting” R&D budgets could lead to high degrees of rigidity, which could lead companies to missing the most important innovation opportunities.

Companies should use today’s tough times as an excuse to critically evaluate their innovation investments. As I argue in Chapter 2 of The Silver Lining (coming next month!), companies need to think about prudently pruning their innovation efforts to focus on ideas with the most potential. Companies should seek to balance focus on near-in opportunities with appropriate investments in exploring new markets that have the potential to be tomorrow’s core business.

While we are on the subject, here is another article suggesting the same thing – Cut Costs, Grow Stronger:

“If you are a corporate leader, you have probably been spending a lot of time lately thinking about costs. In the aftermath of the global economic crisis of 2008–09, the pressure to cut costs — whether driven by cash flow, shareholders, uncertainty, or investment needs — has been extraordinary. Many businesses are struggling to survive. Others, even if they’re doing relatively well, are reducing expenses to make sure they are well prepared for future uncertainties. But there is a positive side to this situation. Dramatic cost cutting gives you a chance to refine or even reformulate your company’s overall strategy. After all, you’re never just cutting costs. You’re making a decision that something is no longer strategically relevant, and that other things are essential to keep. Yes, you may have to lose some product lines and activities, and perhaps some of your employees and customers. You also, however, have the opportunity to help your company grow stronger in the process. We reject the idea that cutting costs in itself makes a business weaker or more limited. To be sure, if you reduce expenses in a panic, or without an eye to strat egy, you could do great harm to your company’s competitiveness. But if you focus on your priorities and on your future potential, cutting costs can be a catalyst for ex actly the change a company needs.

Finally, here is a simple framework that can be a good reminder of what to keep and what to cut:

India’s Next Global Export: Innovation

Here is a quick read on a new framework for innovation from business week: India’s Next Global Export: Innovation:

A Hindi slang word, jugaad (pronounced ‘joo-gaardh’) translates to an improvisational style of innovation that’s driven by scarce resources and attention to a customer’s immediate needs, not their lifestyle wants.

The concept is to get work done by improvising around constraints – the approach does not matter as long as goals are met. However, as we had discussed in assumptions that executives need to challenge, jugaad can have pretty negative implications:

Moreover, because jugaad essentially means inexpensive invention on the fly, it can imply cutting corners, disregarding safety, or providing shoddy service. ‘Jugaad means ‘Somehow, get it done,’ even if it involves corruption,’ cautions M.S. Krishnan, a Ross business school professor. ‘Companies have to be careful. They have to pursue jugaad with regulations and ethics in mind.

This might be a good idea to drive innovation in a culture that is overly burdened with bureaucracy. However, one must really ask the question about why there is bureaucracy in the first place. In fact, work getting done bypassing bureaucracies will reduce the need to remove inefficiencies…

How to Manage Virtual Teams

MIT Sloan Review had an interesting article on How to Manage Virtual Teams. As we have discussed in the past, the need for effectively managing cross-cultural cross-organizational virtual teams will only increase with time.

The article measures virtuality in terms of “dispersion” of teams and finds that even small distances (different floors of the same building) have a significant impact on team cohesion. R&D managers probably need to understand that processes and tools needed for managing virtual teams may actually benefit teams that are traditionally considered collocated.

The article is a very good read. However, here are the key findings:

* The overall effect of dispersion (people working at different sites) is not necessarily detrimental but rather depends on a team’s task-related processes, including those that help coordinate work and ensure that each member is contributing fully.

* Even small levels of dispersion can substantially affect team performance.

* When assembling a virtual team, managers should carefully consider the social skills and self-sufficiency of the potential members.

I guess the main takeaway is very encouraging – virtual teams can be as effective (or probably even more effective) than collocated teams as long as tools exist to provide effective communication. The key challenge is for R&D managers is to avoid communication through large documents: they are filled with discipline-specific jargon and no one has time to either develop thorough documentation or to read someone else’s large document. More importantly, documents fail to capture rationale followed by one team member to reach decisions that impact other team members. Interesting challenge… DPSTBNMT3VHA

Success of change (improvement) programs

Financial Times has another interesting take on success of process improvement projects in Management – Failing to cope with change?

At the meeting, survey data were presented which suggested that, while 37 per cent of UK board members believed that their change programmes were generally successful, only 5 per cent of middle managers did.

As we discussed in the recent post on key success factors for lasting process improvement results, managers have an inordinate amount of responsibility and power to drive success.

A confident leadership team may know that the right choices have been made. But it may take longer for this to become apparent to the rest of the organisation. Of course, there are two other possible explanations for this gap in perception: wishful thinking in the boardroom or plain bad communication.

The keys to success (real not imaginary) remain the same: long-term focus, metrics, rewards/raises tied to metrics and manager involvement. I guess the point the article makes may be important to – a consistent simple message from the executives (and board) to the teams:

Send a small number of simple messages again and again,” he advised. “And the larger the organisation, the simpler the message has to be.

Questioning and Skepticism in R&D

The New Scientist had an article about questioning culture in organizations Living in denial: When a sceptic isn’t a sceptic: “

A climate denier has a position staked out in advance, and sorts through the data employing ‘confirmation bias’ – the tendency to look for and find confirmatory evidence for pre-existing beliefs and ignore or dismiss the rest. Scepticism is integral to the scientific process, because most claims turn out to be false. Weeding out the few kernels of wheat from the large pile of chaff requires extensive observation, careful experimentation and cautious inference. Science is scepticism and good scientists are sceptical.

R&D management probably is as close to science as we would get in most commercial ventures. As we saw in a recent post, one needs to encourage questioning and skepticism to drive innovation. However, managers need to strive to keep the entire process constructive and avoid “rote denial.”

Where Process-Improvement Projects Go Wrong

Here is a very interesting article from MIT Sloan Management Review on effectiveness on Where Process-Improvement Projects Go Wrong. I have read the results of a survey on cost cutting that more than 90% of the organizations surveyed failed to maintain savings for more than 3 years. This article mentions another interesting result: more than 60% organizations adopting 6 sigma are dissatisfied with the results.

The underlying thesis is that even though process improves under the management attention in improvement projects, it revers back to original unless organizations puts in place concrete practices to make sure changes stick. Normally, the pre-improvement practices exist because of culture / team member tendencies. These are difficult to change and or maintain. The article points out four lessons:

First, the extended involvement of a Six Sigma or other improvement expert is required if teams are to remain motivated, continue learning and maintain gains.

Second, performance appraisals need to be tied to successful implementation of improvement projects. Studies point out that raises, even in small amounts, can motivate team members to embrace new, better work practices.

Third, improvement teams should have no more than six to nine members, and the timeline for launching a project should be no longer than six to eight weeks. The bigger the team, the greater the chance members will have competing interests and the harder it will be for them to agree on goals, especially after the improvement expert has moved on to a new project.

Fourth, executives need to directly participate in improvement projects, not just “support” them. Because it was in his best interests, the director in charge of the improvement projects at the aerospace company created the illusion that everything was great by communicating only about projects that were yielding excellent results. By observing the successes and failures of improvement programs firsthand, rather than relying on someone else’s interpretation, executives can make more accurate assessments as to which ones are worth continuing.

I think the fourth point is probably the most important one. I have seen many a six sigma projects failed because there was no real incentive to change, no pressure from the executive in-charge to drive performance and no clear way to measure performance to start with…

How Do Innovators Think? Harvard Business Review

Harvard Business Review has an interesting article about How Do Innovators Think? The entire article is a good read, but here is the list of capabilities/tendencies of innovative people:

Associating: Connect ideas together
Questioning: Ask why, how, what
Observant: Look into details
Networking: Know who to talk to and how to reach them

Clearly a good list. The one thing that they make a point of (and I agree completely) is inability of even the most creative people to question – mainly due to cultural/social learnings:

We think there are far more discovery driven people in companies than anyone realizes. We’ve found that 15% of executives are deeply innovative, meaning they’ve invented a new product or started an innovative venture. But the problem is that even the most creative people are often careful about asking questions for fear of looking stupid, or because they know the organization won’t value it.

I guess the biggest challenge for R&D managers then is to develop an environment that encourages civil and constructive questioning.

Three Big Assumptions Leaders Should Question

In an article in the Washington Post, John Boldani points out Three Big Assumptions Leaders Should Question:

It is important for organizations to set firm goals
Quick wins are essential to managers in transition
Senior leaders believe in their CEOs

Many organizations I have seen suffer from too much focus on goals. One widely known example of this is in “Stuffing the Channel” at the end of the measurement period to meet sales goals and get bonuses.

It is important for organizations to set firm goals. People need to have direction so it is important to point them in the right direction. But such a single-minded focus on goals may end up damaging individuals and the organization says a study conducted by Maurice Schweitzer of Penn’s Wharton School. Relentless pursuit of goals tempts managers to cross ethical boundaries and abandon ‘sound business practices.’ Unreached goals may then end up frustrating an organization rather than helping it to succeed.

However, if the goals are not firm than organizations tend to not really perform anyway. If one enforces a culture that goals need not be met, how does one motivate and reward the organization? I think a better approach would be to set up a tiered goal structure: An (exponentially) increasing reward for meeting or exceeding goals. It is even more important to make these tiers somewhat achievable – encouraging teams to try to reach the next level (Remember the Lincoln Electric case in business school?)

Another key with goals is to have balanced goals: opposing goals that make sure that behavior does not become too goal focused. In an R&D world for example, successful R&D projects are a goal most organizations have. A success driven goal alone will encourage managers from hiding failures and impede risk taking. A balancing metric would be wasted development effort: tying some fraction of bonuses to projects that fail – 90% of bonus for success and 10% for failures… This would encourage R&D managers to take risks and encourage acceptance of failures.

The other recommendations are similar. Senior leaders clearly should not always believe in the CEO. However, a show of solidarity might be good for encouraging and motivating R&D teams.