Innovation is nurturing growth

But, really, what is innovation? It seems to be an exciting concept with a lot of fuzzy edges and an elusive magical aura. Few companies could say they have a handle on innovation as a capability they manage like other aspects of their business.  Those that do are amazing and powerful (check out this growth chart for Apple). Innovation makes an organization competitive because it is measured by growth in new products and services or growth in new users (or both).

More often than not, the World’s Most Innovative Companies are a flash in the pan (Groupon?), or have a short tenure at the top of the list and then gradually fade into normalcy. This makes innovation seem even more mysterious and slippery… something to admire, but too vague to manage.  Something based on size or timing, not a sustained advantage directed at a market.

So how can organizations get this capability and why is it so elusive? Let’s start with the elusiveness first. Roger Martin, Dean of the Rotman School of Management, explains that many businesses have a hard time with innovation because it requires a different mindset than the way most business people approach problems. In his book, The Design of Business, he identifies three types of logic necessary for effective problem solving: deductive, inductive, and abductive. 

The problem is, most of our schools and businesses teach and practice only inductive and deductive reasoning (abductive isn’t even in my spell checker). Frankly, most of us don’t chat about formal logic over coffee and donuts, so you can see why this makes innovation slippery. The less formal version of this logic is often called design thinking and was pioneered by IDEO. But that term is awkward because design is associated with fashion, graphics and art, while innovation is more about doing than thinking. So, I just call it the capability of innovation.  I don’t disagree with Bruce Nussbaum’s focus on creativity, but that still feels incomplete to me.

The capability of innovation is a compound set of three skills that enable you to solve problems for your customers: rigorous observation, creative wonderment, and risk management. Whoa. Did you say wonderment? Yes, yes I did. (see Phineus and Ferb) Innovation is about coping with ambiguity and uncertainty while constantly moving forward to discover new opportunities. Since most business people haven’t developed these skills in their formal training, not knowing the best path forward makes them uncomfortable. So they stick with what they know, which keeps them locked in the present.

Three core skills of innovation

1. Rigorous observation. This is about being obsessed with your customers in action. This obsession involves asking questions, taking photos, and simply watching what they do (and don’t do) when interacting with a product or service. Ironically, many product managers defend their product deficiencies by saying customers didn’t behave as they should (at least they notice the gap!).

2. Imaginative wonderment. Instead of defending them with deductive reasoning, an innovative product manager would ask, “I wonder why that happened?” This is a moment of truth where innovation will live or die. If the leader shifts reasoning modes and becomes curious, the next step is to explore what could be happening instead of defending what is happening. This is not magical or fluffy, it’s a rational leap based on an observed pattern.

The exploration process that underpins imaginative wonderment is essentially the scientific method. It is the rapid iteration of possibilities that are tested against audacious goals (Like Thomas Edison and the light bulb). An emerging solution to a customer problem is driven by simple questions like, “Why not?” but is also constrained by feasibility (can it be built?) and viability (does it make business sense?). This exploration is both serious and fun. Systematic testing and elimination of ideas and options requires discipline, tenacity, and rigor. Generating an endless array of possibilities to test is playful, energizing, and empowering.

3. Risk Management. Overcoming the challenge of risk in innovation starts with a better understanding of the difference between innovation and invention. The dominant (but false) understanding that innovation comes from a blinding flash of insight, or from a lone genius that sees the world from a different angle, makes innovation seem untenable. How is a company supposed to plan for genius to occur? What’s the timeline? No wonder it’s not supported.

Innovation is not driven by breakthroughs in technology… it’s the opposite. Innovation is driven by commitment to satisfying customer’s needs and keen observations about what is and what is not working. These observations push the limits of technology and force the breakthroughs. Innovation in practice couldn’t be farther from being a lone inventor in a lab. Innovation is a collaborative, hands-on experience, taking place on the front lines with customers.

So the way to manage risk in innovation is first to stay very close to your customers, second to create a portfolio of innovation projects designed to solve their problems, and third to move very quickly to determine what doesn’t work so you don’t waste time and resources on unacceptable solutions.

Not every idea will evolve into an innovative solution (either attracts new customers or more engagement from current customers). An effective innovation portfolio should work much like an effective stock portfolio. There should be a mixture of incremental improvement ideas, evolutionary ideas, and revolutionary ideas. Investing in a balanced portfolio of several ideas mitigates the risk across all of them instead of placing “all of your eggs in one basket.”

Innovation is not whimsical, magical, or fluffy. It’s not accidental or even unpredictable. The problem with innovation for some companies could be that it’s more about nurturing than managing, a human-centered style not often associated with the titans of business.

Not an inspiring image of wellness for most people!

Sure, there are lots of companies touting the value of perks in today’s world (my favorite is BetterWorks). But most people still shy away from the term wellness.   Well I think it’s the best word to define this successful human condition, so as Bono says, “I’m stealing it back.”

Physical health is only part of the equation

One of the big problems with wellness is that it’s so closely associated with physical health. But true wellness is a multidimensional issue involving your whole self, not just your body.  This is of course, not MY idea, but I’m focusing on it here because it’s such a misapplied aspect of being human by so many of us, and it’s so critical to sustainable high performance.

Abraham Maslow was on the right track with his Hierarchy of Needs, showing us that some needs are more fundamental than others, and that humans are motivated to get beyond the basics and become creators of good things in the world.  And it’s likely that people have explored the holy trinity of mind, body, and spirit from the beginning of time, but even that extension beyond “body” is incomplete.

Somehow in modern America we commonly reduce wellness to physical health, and make that a personal responsibility to take care of in isolation of work and family.  You go to a doctor when you are “sick” and he/she tells you what you should do to fix your body to regain health.  I don’t think many doctors prescribe social remedies, but the now famous Framingham Heart Study, effectively shows that health is highly dependent on social interactions.

A complete model of wellness

Based on discussions with thousands of people via research at IDEO and the YMCA, I’ve developed a simple way to evaluate wellness in a holistic way.  The model was developed from patterns that emerged when people were asked, “What makes you feel well?” Their responses were captured, and then categorized into these dimensions of wellness.  For another complete view of well being check out the Gallup model.

User defined dimensions of wellness

• Wellness is individually defined (there is no prescribed “best state” for everyone).
• Wellness has rhythm (sometimes you feel more well than others).
• Wellness is about balancing choices (not applying a routine or formula).
• Wellness is about control (for some it’s “in” and others it’s “out”).

A first principle of human centered organizations

From a business standpoint, employees with low levels of well being are far more expensive than those with high levels of well being.  But this “loss of work” cost based approach doesn’t even consider the “opportunity costs” of not being on top of your game on a regular basis.

Gary Hamel is leading the world to reconsider their fundamental models for organizing and leading people with his Business 2.0 Challenge.  He suggests that this process starts with rethinking principles, and I fully agree.  Furthermore, I’m suggesting that a fundamental principle of business success is individual well being, and it is a primary element of successful leadership to be well and to lead others to wellness.

So my call to action here is that businesses need to rethink their fundamental relationships with the people who work there.  If a holistic model of wellness is critical to high performance, then issues that are often considered “private” or “personal” in our traditional models of management become essential in employment relationships.  Much of this will be discounted as “coddling” employees with yet more benefits and perks, but in today’s world of business where creative thinking and critical problem solving are often the source of competitive advantage, I’ll bet on wellness as a strategy.

Here’s what I’m noticing so far:

1. Focused, like a laser. Maybe this is obvious in any start-up environment, but it’s very clear that people know why they are here and what they are supposed to be doing.  With this focus comes clarity of purpose and unity of efforts.  This is not heads-down, buried in my work kind of focus… rather, it’s a collaborative, prioritized list of action items getting checked off without distraction.

2. Urgent, like I’m late. This is fast motion, high energy urgency like you see in professional sports.   If you like my “Hockey is Life” series, my experience so far reminds me of the lesson about winning the short races.  And, this is not a panicky running around like chickens, this is a confident and relentless pressure to move forward quickly.  There’s no time like the present to get stuff done… now (is that redundant? Doesn’t matter, get it done)

3. Eyes on the horizon.  It seems everyone is scanning the world at all times.  There is a continuous thread about user needs, client needs, technology trends, and industry subtleties woven into everyone’s work dialogue.  This external orientation keeps things simple, and allows for a cultural value called “frugality” to thrive.  This means invest in the things that matter the most and avoid those that build comfort or create distractions.

4. Dig in with both hands. There is an action orientation that people at Hulu call “building”.  This is a place where builders build.  That means everyone gets their hands on something and makes it come alive or makes it better… and this is professional building, not “let’s see if we can make this work” experimentation.  There’s an “over the moon” quality standard that starts with a desire for a “pixel perfect” viewing experience for Hulu users, and translates into a “bring your A-game” expectation for every encounter.  Building can happen in any function on any task.  There’s no supervising or managing, it’s all building.  I saw a post earlier this week from Ben Horowitz that underscores this point.  Leaders here are pulling the rope with everyone else… they’re not coaching from the sidelines.  Their skill, content, and experience are applied directly to the tasks at hand.

It’s really fun to be part of the crackling energy and rocking vibe of Hulu.  I’ll keep you posted as things unfold.

I am forever a changed person and will always count my IDEO experience in the “best of times” category of my life.  I hope to do you proud and take design thinking to even further heights at hulu.

As you might imagine, the place where I’m heading must be pretty amazing for me to consider moving on, and well, it is pretty compelling!  There’s a lot of buzz in the world of technology and media as the new era of video distribution comes of age, and hulu is right in the middle of it.  This will be a whole new education for me as I join Jason Kilar and company in the building of a great new organization.

I’ll keep you posted on things at hulu as I get my feet wet.

Key to these models is the distinction between a “real team” and other small working groups that don’t exhibit complementary skills, commitment to a common purpose, shared performance goals, and mutual accountability for their approach to the work at hand.

Over the years, I’ve come to find that team development as Katzenbach, Smith, and Tuckman observed it depends on a stable surrounding environment, which is becoming less and less common.  Today’s work place is fraught with complexity, ambiguity, and overlapping priorities.  Speed and confusion are facts of life, not the result of a poorly run organization.

photo from blog.jaciclark.com

Often teams have a hard time functioning as suggested in The Original Wisdom (choirs sing here) because the demands to perform start immediately, and there’s no time to go through the team development stages.  And I have to admit that many business leaders in my career have argued that the time it takes for team building is unnecessary.

Today’s successful teams seem to skip some of the stages and get right to work, much as people can jump up and start dancing together at a wedding with little planning or communication.  They just know what to do when the music starts. I’ve shared some of the insights about this “new” kind of team in an earlier post on teams, and it was so popular I thought I’d add some more on the topic.

Here’s some of the new wisdom emerging from my observations conducted at IDEO with my research partner Daniel Wilson:

3 Degrees of Team: we’ve noticed performance differences in teams can be correlated to various “degrees” of team complexity.  A “client-embedded, extended team” seems to out perform the other types.

1. A “core team” has 3-5 people with different skills working closely on a project.

2. An “extended team” can have 20 or 30 people who identify themselves as members of the team, but do not participate fully in all team activities.  Sometimes they offer a quick assessment of the work, while other times they make a specialized contribution to the overall work product.

2. A “client embedded” team has representatives of the sponsoring agency actually on the team versus reviewing or supporting the work from afar.

Team fluidity: one commonly held belief of a team is that it forms with an original set of members (like a rock band) and keeps those same members for the life of its work.  We’ve seen that successful teams are more fluid and can easily accommodate the arrival and departure of members over the life of their work.  This is managed with the use of project artifacts, boundary objects, and a continuing project narrative that keeps everyone up-to-date and connected to the current state of the team and work.

In my Free Advice for GM series, I suggested an “open source” model of organization as a radical way to remake SATURN into a viable brand.  Well, last week I was at a conference where Bob Johansen of the Institute for the Future presented their Ten Year Forecast.  One of his examples of the future (in action today) is a company called Local Motors. Check it out, they are already running a car company along the lines I suggested for SATURN.

It’s a small scale, regionally focused car company that uses a growing base of active participants to design, build, and sell cars.  Their first model, called the Rally Fighter, was designed by a student!

Does anyone know a SATURN dealer?  Send them my way so we can create another example of building cars in a more sustainable, interesting, and profitable way.

Free advice for GM… er Penske #4

The conventional wisdom on how a team should operate

I’ve been around a lot of teams… and a lot of team building.  Enough to be cynical about the whole topic.  But something about the potential of people working well together keeps me coming back to explore further.

The famously successful Netflix contest awarding $1 Million to anyone who could solve their movie recommendation problem is a great case to illustrate how creative teams are different than traditional work teams.

The leader of the winning team credits their success to blending different approaches to the problem and coming up with something better.  This is one of the things that powers successful design teams at IDEO.  That is, teams comprised of diverse perspectives and styles are better  at solving complex problems than teams of like-minded, similarly trained members.

One quote in a NY Times article about the Netflix Prize really got my attention:

The sort of sophisticated teamwork deployed in the Netflix contest, it seems, is a tricky business.  Having these big collaborations may be great for innovation, but it’s very, very difficult. Out of thousands, you have only two that succeeded. The big lesson for me was that most of those collaborations don’t work.

Tricky maybe, but that’s because much of the conventional wisdom about running a good team is wrong under conditions of uncertainty, not because it’s inherently hard to accomplish. Most people think of teams as a group effort where you divide the workload among a cohesive band of players, led with clear directions from a focused leader.  Under this model of teaming, diversity is bad and discontent worse.  So with this dominant mindset, it’s no wonder the concept of multidisciplinary teams is so hard to handle.

Given the value created by multidisciplinary teams, there’s a growing body of insights developed by people like Jeff Polzer and Daniel Wilson that show us some of the tricks multidisciplinary teams employ to overcome the barriers of their diversity.

And, if you are working on a creative task or solving a complex problem, the effort pays off.  Just ask IDEO.

Here’s some keys to getting multidisciplinary teams to work (pardon the academic lingo, but you’ll get the point)

1. Proactive Self Disclosure: teams effective at solving complex problems must thrive in uncertainty.  It’s more functional to share when you are stuck or “don’t know” than it is to pretend you do.  Daniel Wilson studied adventure racing teams and found that the “best of the best” quickly share their needs, issues and concerns so the others on the team can rally around them with proper supports and solutions.

2. Conditional Statements: Instead of stating ideas as facts, certainties, or “THE” answer; members of successful problem solving teams share statements with soft edges like, it might be…  I’m not sure but… and could it be that? These statements invite others to disagree or add to the comment versus attempt to be persuasive, conclusive and to convince others to go along.

3. Interpersonal Congruence: This means that members of a group view each other the same as they each view themselves (strengths, weaknesses, intentions).  Jeff Polzner’s research shows that groups can achieve harmony and produce effective work processes by expressing rather than suppressing the characteristics that make them different.

4. Clarity of Purpose: when all members of a team are clear about the reason they are together, it’s easy for them to “triangulate” away from polarized opinions and use the common purpose to discern the best of each side’s argument.  Rather than compromise to reduce conflict, this common purpose (like the Netflix Prize) pushes people to breakthrough ideas.

I experienced this at a store this week.  I got a card for $80 off at Lens Crafters from work… seemed like a good deal and worth giving Lens Crafters a try although I would not normally go there.  Check out the card below, it seems like a pretty open deal.  It even mentions “designer eyewear.”

Bait and Switch?

Upon arrival at the store, I learned that Oakley products were excluded.  Oh, and not Maui Jim either.  I came to order a set of prescription lenses for my Oakley frames, so I pressed the issue after reading the card again.  There’s no mention of any kind of exclusions, although I can see that it says “complete pair”.  So I ask if I have to get new frames to qualify.  “No, Oakley doesn’t let us give discounts on their products.”  I ask her to read the card and show me where Oakley is excluded.  She can’t find that anywhere.  I press further, and she gives me a corporate business card and suggests I call there.  I find out this is not a toll-free “help” number, but the main line to the corporate headquarters.  I get to a Service Representative and he asks if I’ve spoken to the General Manager of the store.  He sends him an email and I get a call back.  He says, “Sorry, Oakley is excluded.”  I let him know I think this is a “bait and switch” and I don’t want to do business with a company that isn’t good for their word.  We conclude the deal and I am done with Lens Crafters… probably for life.

Let’s estimate what the costs might be:

1. I buy new glasses every 2 years x 40 years= 20 $300 pairs they won’t get ($6000).

2. I tell all my friends that this is not a good store.  Let’s be conservative and I affect one person for one visit  at $300.  Or, say I affect 5 people for life = $30,000.  Hard to say what will really happen here.

3.  I go to YELP and give them a bad rating.  Could be hundreds of people who check that before shopping.  Lets just say 100 x $300= $30,000.

This is fuzzy math, I realize, but it’s easy to imagine that instead of an advocate they’ve created an enemy.  They put the card together, sent it out, and then refused to honor it.  They could have said $10 discount on any frame, with some exclusions.  But they didn’t.  I’d call that poor execution in this promotion.

The cost of poor execution and then refusing to honor it is much higher than simply honoring it.  Sure, if they honor it, they risk me telling my friends to go get their Oakley lenses for $80 off.  But that’s a very small number of people, and the card has an expiration date of September 2009, so the exposure is limited.

Using the organization ecosystem model from the first post in this series, I would place Saturn in the “independent” corner and really push the envelope on how to design, build, and market a car using an open source model, borrowed from the software industry.  As you know this model has produced some amazing products like the browser Firefox from Mozilla.

In fact, some of these ideas are already in rough formation.  From Wikipedia I’ve learned that Penske will not be buying the GM factories and will eventually have other car companies build cars sold as Saturns. At this point, GM will build the Aura, Vue, and Outlook for Penske for two years. To replace GM as the brand’s manufacturer, Penske is in discussions with several global automakers, including Renault Samsung Motors of Korea.

Pit Crews have focus and pride

What if they really push for something different and create an open source project for each model?  With the Penske passion for cars and the SATURN commitment to customer service, it’s not hard to imagine a really cool hometown facility that attracts car nuts with prototype vehicles, computer workshops, and a heavy dose of car culture.  Rather than staffing these “stores” with sales people, SATURN could staff them with car designers and engineers that help guide the process and manage the inputs via the open source process.  Interested players could be organized in “pit crews” who develop relationships with each other over time and work on specific elements of the car prototype.  Perhaps stores could work in regional “car craft” networks that involve small scale manufacturing and parts suppliers in the creation of regionally specific models.

Once the prototypes are in final form and are on the road being tested, contracts with larger manufacturing companies could be established to put the vehicles into limited production.  The viral connection to each model would be a grassroots sales force that would bring back the days of localized automotive pride, only it would be distributed throughout the country instead of centered on Detroit.