A couple of months ago I was discussing models that help to think about focusing innovation efforts with Hutch Carpenter.  I said I would post one that I use, and Ooops!  I forgot to do that.  So here's a model that I often use when discussing the type of innovation capability a client wants to build.  My working definition of innovation is "doing something new that adds value to the business."  It's not just about making new products or technology.  For that reason, the people, processes and skills necessary to innovate can vary greatly, and we need to be very clear about what is necessary for each specific situation.

This model is based on two points that drive the approach to the innovation effort.  First, the degree to which the lines in each box are orderly or chaotic represents how well the end solution can be defined before the project starts.  Second, success criteria is determined differently at each innovation dimension. Let's look at how they differ.

Dimension 1 - I call this Innovation for Optimization.  The product or service that the company develops will stay the same, and innovation will focus on new ways to manufacture and deliver the offering to the market.  New technologies, processes, and organizational structures may be introduced.  Clear benchmarks for success exist, and the results can be tangibly measured with existing metrics.  The consumer will not notice a difference in the product or service, but may share in the benefits of the innovation through cost savings and ease of access to the product or service.  An example would be a new manufacturing technology that reduces production costs by 50%.

Dimension 2 - I call this Innovation for Improvement.  The goal is to improve the existing offerings themselves.  It may be that the product becomes easier to use, or new technologies will enable enhanced functionality.  In this dimension, success criteria may not exist already, and can be derived by learning directly from the market. It may involve learning what pain points the consumer has with existing products, or uncovering new uses that an upgrade can deliver.  An example would be the addition of calcium to an orange juice product.

Dimension 3 - I call this Innovation for Invention.  The goal is to develop new products and services that will provide the same benefits as existing options, but in new and better ways.  In this dimension, success criteria for the specific product attributes does not exist, and consumers may not be able to articulate the potential solutions. However, the benefits are well recognized. An example would be new products that increase the ease of eating yogurt on the go.  A yogurt company may develop new technologies or formulations to enable drinkable yogurt or yogurt in a tube. New internal benchmarks for manufacturing and cost structures may need to be created, as the company is making different products.

Dimension 4 - I call this Innovation for Disruption.  The result of this type of innovation is that it fundamentally changes the competitive landscape.  Very often - but not always, this type of innovation focuses more on changing existing business models than on changing the products themselves.  We can see this type of innovation playing out in the publishing and other media industries, as existing business models are becoming irrelevant.  New products and technologies play a part, but they are enablers that allow consumers to access media more easily and inexpensively than ever before.  The sources of power are shifting in the market, and existing benchmarks become irrelevant. Consumer research is very important here, but as a source of information about what is valued, not as a source of solutions as in dimension 2.

Since my work involves ensuring that new offerings are relevant to the market, the focus is from the perspective of how the consumer (or other end-user) will perceive the differences.  It also sets the stage for how directly the consumer can give input to what the end result will be, and guides the type of work we need to do.  From my experience, most companies are very good at Optimization, and they can often stretch to create innovative improvements.  This work can be handled in existing development processes.  In future posts, I will describe the fundamental difference in the work necessary to innovate in the 3rd and 4th dimensions, as this is where the existing development processes typically break down.

Of course your company isn't running a casino on purpose. But is it running one accidentally? You can tell based on its approach to innovation investment.

Does your company solicit new ideas for products and technologies in a more random fashion, investing in those that either can be executed with current resources, or do not pose much risk to the status quo?  Do people know the success criteria for a breakthrough idea?  In other words, is there a way to tell if a new offering with no current benchmarks is likely to succeed?  Usually the answer is no.

Does this sound familiar?  If it does, then your company probably casts a wide net in terms of investing in innovation.  Since most ideas are likely to fail, it's better to invest in more, and more varied, options to hedge your bets.  Notice I said bets, because that's exactly what the organization is doing.  The innovation process is essentially providing a mechanism to place bets knowing that most will lose, and hoping that the one(s) that succeed will cover the losses.  Isn't that what happens in a casino?  It provides a place for people to come and place many bets, hoping that a few wins will cover the losses.

On the other hand, does your company understand its market, define new opportunities to better meet the market's needs, and develop technologies that enable new products and services to satisfy those opportunities?  This may not be nearly as sexy an option at first glance, however it does provide a way to tell if radical new ideas have a chance of succeeding before investin in their development.  The chance of failure in developing something truly new and different is greatly mitigated. This is the difference between investing and betting.

In a real casino, the house always wins when most bets are lost.  In a real company, the only way the house always wins is to ensure success.  So why are most companies pursuing the casino model?

We've changed the name and look of the blog to better integrate with my consulting practice.  The new name for the practice is Synaptics Group, Inc., and the blog will now be called the Synaptics Blog.   These changes should better reflect the focus of the work, which is on Market Relevant Innovation. 

What's Market Relevant Innovation?  Think of it this way.  Apple didn't invent the MP3 player, nor did they invent e-commerce.  But they did develop the most market relevant way to access media, through the development of the iPod, iTunes, and the business model that connects them.

This is just the first step in connecting the two sites.  The design will probably go through another iteration or two in the next few months, and I'll continue to post the latest thinking on Market Relevant Innovation!

If your organization is like most, there are many processes in place that ensure no one can make a mistake that could cost the company vast sums of money, damage its reputation, or do other terrible damage.  While many of these processes are in place for a good reason, has anyone ever looked at the trade-offs that have been made as a result?

The reason I point this out is that I find it interesting that these processes are never, ever questioned.  Even though I've watched companies miss out on very lucrative opportunities as a result of blindly following existing processes, I have been left wondering why no one questioned what else could have been done to have avoided missing out on the opportunity.  A lot of effort goes into protecting the company from harm, which makes it all the more interesting that missed opportunities are seldom viewed as harmful.

I highly value thoughtfulness, and due diligence, and I am not advocating that companies abandon all existing processes to encourage people to chase after anything they want.  Far from it.  I just wanted to point out that it does seem a bit odd that questions about the value of missed opportunities are seldom, if ever, raised.  It would be interesting to see if there are some processes that are costing more than they save.

Do you know why all the processes at your company exist?  Would you know when their use should be questioned and/or challenged?

When I was in business school, I did an independent study thesis on the fostering design and innovation within corporations.  The process required selecting a department and a professor to sponsor the work.  When I first started business school, I thought that my independent study would best be sponsored by either the finance or marketing departments as I felt that lens would give me the holistic view needed to foster innovation.  I was wrong.  After my first two semesters, I realized that the key to successful innovation would be to understand how people and organizations work - beyond the org. charts.  As a result, I did my independent study under the sponsorship of the Organizational Behavior Department.  What I learned has proven invaluable as I guide my client organizations through the culture, structure, and power issues to realize the change required to innovate. 

When clients ask me if there are any reference materials on innovation, I start with a few articles that I still find invaluable to help me think through intangible organizational issues in a clear, structured way.  I suggest they start with these articles to provide a common language and shed light on issues they will likely face.  Most of them are fairly old, but I have found them to stand the test of time.  Here are the articles I use as a foundation:

Edgar Schein - Organizational Culture - For some reason I can't find a link to this one.  If anyone finds it please send it to me. (Excellent for discussing culture in a tangible and concrete way.  Allows you to pinpoint cultural contradictions.)

Edgar Schein - Three Cultures of Management: The Key to Organizational Learning  Available for purchase. (Great for understanding what motivates people's decision-making, beyond functional discipline.)

Steven Kerr - On the folly of rewarding A, while hoping for B (A great reminder on the true power of reward systems.)

Margaret Wheatley - Searching for Order in an Orderly World  Available for purchase.  (In undertaking innovation projects, it's a great help to understand the the contrasts in creating order in natural and unnatural environments.)

Maureen Scully and Debra E. Meyerson - Tempered Radicalism and the Politics of Ambivalence and Change  Available for purchase. (Any internal person responsible for innovation is put in the position of being what the authors call "Tempered Radicals".  It's an excellent primer for the issues they face.)

Deborah Tannen - The Power of Talk: Who Gets Heard and Why - (A good look at the differences in communication styles, and how our biases shape who gets heard, who gets credit, and what gets done.  It's focused on gender differences, but the ideas are equally important to the cultural influences we face in an increasingly global workplace.)

Kurt Lewin - He pioneered the "Unfreeze, Move, and Refreeze" model that underlies all successful change management programs.  I had a professor once who said that we could look at all the different change models and find that they could all be reduced to Lewin's.  He was right.

Most consumer research focuses on learning about what people do, and most innovation projects focus on developing new technologies into things people will buy. Notice the disconnect?

Too little research is focused on how people make decisions, and too few innovation projects focus on developing something that fits better with people's decision processes.

Learning to do this type of research is difficult.  Learning to connect this research to the development process is even more difficult - and rare.  No one would argue that it is important to learn about how consumers make decisions, nor would they argue with the importance of connecting this knowledge to the development process is important.  In fact, many would say they are already doing it.

I have not seen a product or service fail when this is done well, and yet according to Stevens and Burley, at least 1 of 3 products fail  at launch despite research and planning.  Clearly, we can see that doing these activities does not mean we are succeeding at connecting them.

My last post was about the success of Monocle, and how founder Tyler Brule's incessant, immersive research plays a large role in this success.  But it's not the only reason Monocle is successful.  JD asked the question, "Is Brule able to do this because he is part of his target market, and he is providing products and services that he, himself, would want?"  This is a great question, and my answer is that while this may very well be true, it's not enough.  If it were, he could just sit behind his desk all day and dictate what he likes rather than spend time in the market.

Immersive research to get to the heart of what drives the consumer's decision-making process is half the battle.  The other half is the ability to translate what we learn about the market into products and services that actually connect with these drivers.  In my experience, this is where most companies fall down.  The inability to translate these intangible needs into tangible products actually encourages superficial research.  It's easy to make a direct link from what a consumer says they want, to delivering on what was described.  This is great for incremental improvements, but consumers cannot tell you how to disrupt a market.  Tom Martin said it well today in AdAge, "The customer is paying you to solve his problems before he even realizes he has them."

The translation from consumer understanding to the creation of the right products and services is the other area where Brule's team seems to be executing flawlessly.  The fact that he is part of his target market may help him, but being part of his market does not automatically give him the ability to translate.  We are all members of various target markets and may work for companies that make products for people like us, but the vast majority of us do not have this ability.  So, Brule is good at translating in this market.  For him it doesn't matter whether or not he's good at translation in general.  For other companies, this matters a lot.

The ability to translate is equally important for all functions in an organization, yet it is a skill that is difficult to recognize.  Traditional market research techniques often fail to uncover the depth of insight that will guide the development of disruptive products and services, and traditional evaluation techniques often fail to discern whether or not a disruptive idea will connect well enough to succeed.  Brule clearly does this well, and I don't even need to say more than the words "Apple vs Dell" to further illustrate the point.

I fully believe that you do not need to be in a target market to derive the right insights and translate them into the right disruptive products and services. Right now we're seeing success with CEO's who are good translators, but the CEO doesn't have to be the translator.  Is your company recognizing and supporting this role?

I enjoy the weekend edition of the Financial Times, part of which is Tyler Brule's weekly column.  A few months ago, something started to catch my attention.  It appeared that Brule's publication, Monocle, is doing quite well.  It is a lifestyle magazine, and has an associated website with audio reports in addition to the printed publication, and even a recently launched retail concept.  There is no user generated content, and it is obvious that everything, from the website, to the audio reports, to the physical publication itself, are very well produced. That's not cheap. So what is Brule doing that allows him to be successful by going against the current wisdom in the industry?

To satisfy my curiosity, I did a quick search and found an interview with Brule in the Austrailian WSJ that sought out my very question.  What I learned was quite revealing.  While there are several factors responsible for his success, what stood out for me was his statement that they don't do any research at all, and that he doesn't believe in it. He then described what research was to him, and it consists of using focus groups to decide what the cover should be, or other specific executional details.  Later, however, he talked about how he spends time with consumers in the shop, just having a chat with them.  He also mentioned that he watches what magazines business people are buying in the airport, and then how he observes what people are reading on the plane. From reading his weekly column, you can also see that he is spending the bulk of his time immersing in his market. He maintains a grueling travel schedule, and makes sure his reporters and correspondents are in the places they are covering. He then mentioned that they did use a readership survey to confirm some of their assumptions about their readers' habits. It was not to learn what features they might like.

Like most business people, Brule has a very narrow definition of what research is.  Unlike most business people, he knows that research as he defines it is not going to help him to connect with his market and deliver the experience they are seeking but cannot define.  From my perspective, Brule executes brilliant research.  He does whatever is necessary to connect with his market, and fully understand what is driving their decisions.  He knows that it is his responsibility to deliver an experience that will connect with this consumer, and he does not expect them to ask for it.  He also knows that there is greater value in delivering an experience that the consumer wouldn't think to ask for, but suits them perfectly.

What can be learned from his success? There is little to be learned from the execution, as what he is doing is right for his market, and would probably not work for say, the New York Times.  What can be learned is that he is ignoring current consumer, industry, and economic trends, he's learning what is driving his market, and he's delivering a series of products to satisfy their needs in a way that his industry competition has not.

Is your company using research this effectively?

Walk into almost any company and ask a random employee what they do.  You'll likely get very specific answers.  "I'm in marketing", or "I'm a manufacturing supervisor", or "I'm a software developer."  They are all very clean, neat, and tidy, with little to no overlap.

Does this make sense?  I would say that when there is a problem in the product development process, it is usually because there is a problem with translation. By this I mean, how does someone within the company translate what they are doing to success in the market?  Companies spend a lot of time and money trying to integrate the disparate functions within the organization.  They focus on smoother hand-offs from one group to the next.  They focus on more integrated processes to bring everyone's interests to bear on the task at hand.

My question is, how often is the task at hand defined as a real market issue that needs to be solved?  Sales people are rewarded for pushing more stuff into the market, and some marketing people are rewarded to the extent that they contribute to this effort.  But how often are the engineers, software developers, and finance people rewarded based on an external measure?  How completely did the marketing person uncover and define a true underlying need in the market?  How well did an engineer or software developer do in coming up with a unique solution for that need?

Rather than focusing on pushing people together to try to integrate their competing interests, it may be better to pose a common challenge for the group to solve.  If this common challenge focused on an external issue, then focusing on the competing interests of different internal functions would be less relevant.  The group would naturally be pulled together, and the overlaps between their disciplines would be covered.

Now, how many companies actually reward their people for meeting these types of challenges?  My guess is that there is a lot of talking about cross-disciplinary functions, but the rewards focus on single discipline metrics. This even plays out in recruiting.  There is a time and place when you need strong functional expertise, and an equally important time and place when you need cross functional ability.  The right people for these challenges may not be one and the same.  Remember, there are people who live in the overlaps.  The challenge lies presenting the right challenges to the right people at the right time.  Easier said than done, but that's no excuse not to try. How are the overlaps covered in your company?

It's hard to find a company that does not embrace multidisciplinary project teams these days. The idea is that since we all have our functional blindspots, a team that brings disparate disciplines together will have all the potential blindspots and pitfalls covered.  While there may be more team disagreements, they will happen earlier in the process, resulting in less rework and greater efficiency overall.

Then why is it that some multidisciplinary teams fail, while others appear to work magic? What I've experienced myself and in working with client teams is that in an effort to ensure diversity of functional discipline on a team, organizations fail to acknowledge that there are some attributes that a team must share in order to accomplish their goals.  These attributes are not based on functional discipline, but are based on how people think, work, and interact.  Does a person do well with ambiguous problems, or do they prefer concrete goals and information?  And what type of thinking will best suit the needs of the project?  Let's take an example. For simplicity, we'll just discuss the engineering and marketing disciplines.

Project A:  The goal of this project is to launch an upgrade to an existing product. The current product does well in the market, yet it has been acknowledged that some improvements could be made. 

A good marketing person for this project will know the current market well.  They will be comfortable dealing with quantitative data about exactly what features need to be improved. They will also know price sensitivity of the consumers, how current competition will likely react, how an improvement will enhance distribution and retail relationships, what the advertising message should focus on, etc.

A good engineer for this project will know the current technology and processes well.  They will know how to tweak current processes, and how to modify desired features to be made on existing production lines, with minimal upgrades.  They may even have figured out a way to offer an improved product while cutting current costs.  They will know what can be done to hit the launch deadline, and have a plan to continue upgrades in future launches. There will be clear boundaries between their work and the marketing person's work.

Project B:  The goal of this project is to come up with an industry breakthrough that will ensure the company's market leadership in the next five years. It needs to reinforce the company's brand image with consumers, yet make current product competition irrelevant.

A good marketing person for this project will understand why the current market is what it is. They will know what fundamental needs their products satisfy for consumers, and they will want to understand what other product categories also satisfy these needs.  They will shun current industry assumptions about how the market should work, and they will think in terms of new business models, and how to change the current competitive environment. They will focus not on defining product solutions, but on clearly defining the success of a new offering.

A good engineer for this project will understand the needs that different technologies can satisfy.  They will love manipulating technologies to satisfy new needs.  They will not want to be asked to figure out how to make a specific product, but will want to be asked to devise a way to satisfy criteria that is based on both consumer and business needs. They will not want a spec sheet, but they will want to understand the needs first-hand.  The boundaries of their work will often be blurred, blending with the marketing person's work.

Most companies do not define the intended scope of a project as clearly as I have defined here.  Since they typically lack the tools or vocabulary to define the skills required to function well within different project scopes, team members may come to the table with goals that may be at cross purposes.  Imagine the marketing person in project A, being asked to achieve the goals of project B?  Or vice versa?  As they used to say about the old sit-com plots - We can be sure that mayhem will ensue!

The next time you are on a multidisciplinary team at your company, think about the scope of the project you are working on.  Has it been defined? Is everyone on the team suited to working in the way that is needed for that scope?  What have your experiences been?  I'd love to hear how others have tackled these issues.