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.

I’m not sure why this concept is so hard to grasp for business people. So I looked it up and found that the Latin root of familiarity is intimacy.  Ah ha!  After a quick search on that term, it’s clear that most people associate intimacy with sex.  Which made me think of the famous Annie Leibovitz photo of John Lennon and Yoko Ono.  She’s a living legend for pushing our comfort zones with her art.

John & Yoko Rolling Stone cover by Annie Leibovitz

So I think we should get back to the real definition of intimacy and get more comfortable with how it is so essential to innovation.  For the record:

Familiarity: close acquaintance or knowledge (Latin: familiāritās  intimacy.)

Here’s what I mean by familiarity:

1. Love your customer. Think about when you have a crush on someone. You can’t stop thinking about her and you want to know EVERYTHING about her. To innovate in business, you must obsess over your customer’s behavior and pay close attention to what they do (and don’t do) in their lives surrounding your product or service. If you don’t create intimacy with them, you end up playing “whack a mole” with your new ideas, missing most of the time because you are just guessing.

2. Engage in healthy debate: I like the word debate because it implies that you know both (all) sides of an issue and are fluent with them. Fluent enough to play with them versus trying to win over or kill the other ideas. This level of familiarity is critical to “higher order” breakthroughs because playful interaction with multiple perspectives leads to unexpected connections and the blending of ideas into new concepts.

3. Work with you best friends. Years ago the Gallup Organization found significance in the statement, “I have a best friend at work” in their research on employee engagement. Innovation powerhouse David Kelley is famous for starting IDEO as a place where he could work with his friends.  In the Fast Company article, Greg Ferenstein underscores this point by saying, “You don’t BS friends. And they don’t blow smoke and rainbows when you share with them your crazy ideas.”  Friendship is the embodiment of trust, and trust is foundational for innovation (which is loaded with risk).

For many people in the working world, the ideas of intimacy, playfulness and friendship are against their very conception of work.  But there is more than sufficient evidence linking these types of familiarity with high performance and creative production so things are starting to shift.

The potential for creative greatness in any person is there… but us humans are social beings and fulfilling our potential requires healthy, holistic, intimate relationships.

Wright brothers first flight at Kittyhawk

A great example of this distinction is the invention of flight allowing for the innovation of air transport into a major industry.  The Wright brothers are largely credited with inventing the airplane, but what they really invented was a steering device, which allowed them to make the first “controlled, powered and sustained, heavier-than-air human flight.”

Among the early innovators of air transport were Donald Douglas, who created the DC-3, a robust aircraft capable of carrying things and people, and Henry Ford who was instrumental in the development of paved runways, passenger terminals, hangars, and radio navigation.  Without these innovations, airplanes were an interesting novelty, but they didn’t fulfill a real customer need (like traveling or shipping packages over long distances).

The Ford Trimotor is an example of innovation

Simply put: Invention is driven by technology and innovation is driven by consumer need.

Another example:

At Hulu we are focused on the consumer experience of video entertainment, and innovation is one of our primary goals as a business.  What drives our forward progress is an obsession over our customer’s needs, and a commitment to delivering better and better services to meet their demands.

Innovation in digital media requires deep expertise in software and communications technologies, and along the way Hulu has been awarded many patents for inventions that push the consumer experience to even higher levels.  But we didn’t invent most of the technology we use, or create most of the content viewed on the service; rather we are assembling existing components in new ways that are transforming the media business for users, advertisers, and  content owners.

Is that innovation or invention?

Many popular web-based services are breaking ground in the way people communicate, connect, and work with each other.  Sometimes it’s hard to tell if these things are novel inventions or early stages of innovation that will shift markets or generate new ones.

I wonder if Facebook, Twitter, and LinkedIn are inventions or innovations.  They are all valued with great potential to disrupt and transform, but to me they appear more like inventions in their current forms.  They are very cool, novel ways to interact, but that is by definition, invention.  What consumer markets have they created or disrupted?

I think it’s going to be very exciting to walk through the doorways they have created and see what innovation on the other side will produce!

Walking the Tightrope, source: unknown

It’s like walking a tight rope… if you believe high quality is essential to achieving your goal.  On the one hand, you can take the demanding boss or snooty patron approach and simply demand better/more.  This might get you an immediate response, but often elicits such a negative reaction from the people around you that you lose their authentic trust, loyalty, and commitment.

One the other hand, if you tip towards forgiveness and understanding, you actually get less in the moment and hope that next time things will be better.  This might engender fonder feelings from those around you, but fails to set a higher bar, push the envelope, surprise and delight.  It is simply fine (given the circumstances).  Unfortunately, over time, “simply fine” leads to mediocrity.  Eeew.

It’s a difficult competing commitment: be a kind generous human being (like Jesus Christ) or be an innovative bearer of high standards (like Steve Jobs).  Can’t you be both? Sure, and to do so, vision, vigilance, and veracity come to mind.  Introducing the V-3 method of leading for quality!  It helps you walk the line of pushing for mo’ betta, while accepting the inevitable influence of variables, unexpected interruptions, and, well reality taking things back to the lowest common denominator.

1. Vision: paint a compelling picture of what could be, so others are inspired to act.  In fact, paint is insufficient, you must craft it in Technicolor, no THX.  Yeah, that’s the ticket.  Powerful imagery has proven impact on individual motivation by “priming” people with impressions about what is possible and how it will make a difference.  More importantly, a great vision helps clarify a choice and “allows” others to achieve versus forcing them to respond to a command.  A clear and compelling vision attracts people who desire the same things as you, making achievement at very high levels of quality more sustainable.
2. Vigilance: don’t let there be exceptions and don’t let there be distractions from the highest priority aspects of your quality mission.  Allowing exceptions and distractions lets people off the hook before they achieve mastery, and may negatively effect their desire to try next time. See more on this concept in Why Chinese Mothers are Superior by Amy Chua.
3. Veracity: use facts and present them in ways that inspire continued efforts to try harder.  Providing feedback on progress is essential in support of persistance and high achievement.  But the facts must be relevant and presented in appropriate scales.  One study on goal achievement compared weight loss on a wide scale of 25 pounds versus a narrow scale of 5 pounds and found that participants needing to lose 4 pounds were more likely to slack off in the wide scale (because 4 is small compared to 25 while it’s huge compared to 5).

It’s a thin line between engagement and overwhelm.  One last tip:  if you tell someone something is “not good enough” the next action on your part is to pitch in and help make the situation better.  This is a doubly-good thing because mimicry is a powerful social motivator and it’s energizing to have fresh legs in the face of a difficult challenge!

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.

I’ve had many discussions with friends about putting things on the Web and how fearful they are about things being used against them.  I hear comments about invasion of privacy, loss of employment, Gattaca and Big Brother.   One of my best friends refuses to participate in social networking sites so he won’t make it any easier for anyone to find out stuff about him.  He’s a very sharp guy, and I think he is playing a good poker game.  And, as Seth points out, poker is not much fun if you can see everyone’s cards.

For me the issue here is not about transparency, but what game you are playing.  Poker is a small scale strategy game pitting one person against another.  Transparency is the exact wrong thing to do in that game.  But most “games” in life and business are far more complex, and given our 21st Century context (see Thomas Friedman), I think it’s dangerous to live life with a poker face.  It’s more like having one’s head in the sand.

In a complex system, transparency is important as it relates to information asymmetries.  This is when one “side” in a transaction knows more than another.  In such cases, people tend to undervalue an opportunity to avoid risks based on gaps in knowledge. It has been shown in economic theory that the overall value of a system is increased when everyone has access to the same information.

In markets, individuals benefit greatly by sharing their information with others to allow for fair exchanges.  This sharing brings the added bonus of systemic aggregation of information (the Internet enables this like never before).  Aggregation allows people to discover patterns that provide opportunities to adjust tactics and “win” more often.

So here’s some “games of life” to think of as markets instead of as poker:

• Job interviews/hiring decisions… what if employers and employees knew more about jobs and candidates? Better alignment of jobs and people lead to greater engagement and less turnover.

• Health… what if people were able to share their health information more fully? They could see trends and patterns and share them with medical professionals to get earlier and better treatment.
• Business… what if employers shared their performance goals and metrics more fully (even when it’s bad news)?  Employees could intervene earlier and with greater permission to prevent negative trends.
• Dating… more disclosure about values and interests leads to better match making and longer lasting relationships.

Rally to the edge

Technology, cool, edgy, unique.   Born from jets.  Svenska Aeroplan Aktie Bolaget is Swedish Airplane Company in Swedish.  Somewhere it all fell apart and they ended up another mediocre GM-mobile that had no style, no technology, and poor quality.

The organization behind an edgy car has to be edgy.  This is called brand integration (the outside and the inside have to align).  To create edgy things, people have to take risks and push the envelope.  Edge is by definition NOT THE MAINSTREAM.  Okay, I’m ranting… but it’s amazing to me how something edgy can get so rounded off to fit into a corporate model, that it’s no longer viable.

The interdependent organization archetype is a great model for SAAB because it could bring together an array of people and companies from many centers of excellence to work on the coolest automotive technology in the world.  There would need to be lots of experimentation (and failure) going on to find out what new ideas work and what theories don’t hold water.  You just can’t pull this kind of behavior off, if you are trying to please heads of engineering and design at the top of a corporate pyramid.

Key traits of the new SAAB organization:

1. Ad hoc reciprocal structure- each car should be viewed as a project, with full design-build responsibilities.  The designs should connect to the heritage of SAAB (e.g. efficient drag coefficient) but the technology should represent the best of what’s possible in the current market.  These teams should work under temporary agreements with other companies to bring resources necessary for manufacturing.

2. Each model is an experiment- transparency while prototyping (instead of secrecy) promotes involvement from others and improves quality.  Check out Martin Eberhard’s post on how blogs helped at Tesla Motors.  Instead of a long line of reductionist designs, hidden in secrecy while the companies round off the edges to save money, the clean slate approach gives the model team a chance to be truly innovative.  An open process pushes everyone to solve the complex tensions between viability, feasibility, and desirability.  The prototypes should be rallying all over the world to show off and test the new ideas.

3. Entrepreneurial leaders- leadership in today’s auto market is coming from disruptors like Tesla and Fiskar Automotive.  These are entrepreneurial ventures with something to prove and lots of backing to get there.  Each model should be considered and investment and live up to a market based promise of innovation.  Leadership teams should have to start over again with each model to prove this new idea is worth making (and buying).

A return to the Chevy brand essence?

Let’s start with Chevrolet, because that’s the easiest to imagine given their current situation.

To me, Chevy is Americana.  This is the car that represents the American Dream, value, performance, and accessibility.

Chevrolet should help people get their first car, the family car, and have a competitive truck option.  This market means head-to-head competition with Toyota and Honda, so it has to be efficient and cost competitive and produce top quality, reliable, desirable vehicles.  Check out this post on The Truth About Cars for a quick review of the Chevy brand.

Key Traits of the new Chevrolet organization:

1. Efficient hierarchical structure. Clean lines of authority to provide clear direction, efficient decision-making, speed to market, and drive focus on customer needs as the basis for every action.  This market is not about sexy cars, it’s about helping people feel good while they get places safely and manage household costs.

2. Make each model a business. Get past the silos of design, engineering, marketing, etc. and organize each model around a General Manager, with a P&L outcome and a target consumer to drive functional integration.   Fidelity Investments organizes this way (dozens of P&L units), and it works really well.  Develop a rabid consumer orientation as a rallying point, rather than being fractured by functional expertise.

3. Restructure the supply chain. As pointed out by Charles Mann in Beyond Detroit, source great parts from the best suppliers by developing a modular platform.  Don’t try to own everything, focus on total design, build, and sell.

4. Engage employees. Focus on great leadership and build pride (See Jon Katzenbach). The days of management v. labor must be left behind.  This organization needs every single person engaged in a mission to deliver cost competitive, high quality vehicles.  Organize production around manufacturing teams provide job rotations to help employees learn, grow, and develop as a natural component of work.  Use the portfolio of models to allow employees career movement.

5. Reward performance. Pay individuals, teams, and business units more when they meet performance goals in revenue, quality, and costs.  Create healthy internal competition between the businesses.

Next up, how to recover the SATURN brand through an open-source organization.

Much of the interesting discussion around this topic centers on social networks.  Great people like Rob Cross and Clay Shirky have shown that there is considerable power in the emergent relationships we all have around us.  Esteemed management consultant Jon Katzenbach and his colleague Zia Kahn describe the informal organization as an overlay to a traditional organization chart that acknowledges the way things really work.  I’m sure they are all on to something big.

Yet, one of the best tests for how an organization functions comes when people ask, “can you show me the org chart?”  Despite many efforts to engage in peer-to-peer activities, “bottom-up” feedback, and a kinder-gentler management philosophy, I find the “org-chart test” often reveals that power and authority still reside at the top of the house.

My experience at IDEO has shown me something quite different is possible.  As my colleague Bob Sutton says, IDEO does not play by the same rules as most businesses (or non-profits for that matter).  See Tim Brown’s blog about how IDEO uses design thinking to create innovative outcomes.  For the past few years, we’ve been trying to understand more about the conditions that enable design thinkers to thrive.  One significant output of this work is a concept called the “atomic organization” which is not simply a social network, but a fully different paradigm for organization behavior.

It’s ambiguous and slippery, but it’s not chaos.  It is a governed, open system with rules, deadlines, and high performance outcomes.  But there is nobody “in charge”, there’s no corporate strategy, and there’s an amazing amount of transparency and interconnectedness.  Ask for an org-chart at IDEO and people either laugh knowingly or simply don’t get the question.

So we asked dozens of people here to draw their version of IDEO.  The synthesized result is a formal structure with consistent parts and rules that show a right way and a wrong way to organize, but a fundamentally different premise of control.  This approach works from the individual out, much like an atom has a nucleus with electrons orbiting around it, and atoms bond together to create molecules, people at IDEO exist at the center of their org-chart with several orbits full of people surrounding them.

This type of organization is both planned and emergent… it can evolve, grow, and contract.  It can be used to get decisions made and others to act.  Atomic organizations have gravity and density, and can be added together to create organizational mass and aggregated impact.  They make it possible to have multiple leaders of the same business unit, include “non-employees” without calling them outsiders, exist at a scale that is comfortable and manageable for the people within, yet still has incredible reach.

So who’s in charge?  That depends… what’s your question?