Innovation is a competitive capability

Companies are forever talking about how they need a culture of innovation, or that innovation is a global initiative for the next important phase of the business, or that innovation will be the engine to drive the company to new levels, etc. I’m sure you’ve seen the word innovation thousands of times in business media in only the past month.

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.

 

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Be well. Work better.

When I think of wellness, I get images of Richard Simmons and Japanese workers in matching sweats during corporate exercise programs. Too bad. Unfortunately, wellness wound up marginalized as a silly fad in its first big corporate movement during the 70’s and hasn’t really recovered.

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.

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Hello Hulu!

I’m getting my feet on the ground in my new role at Hulu, and after meeting dozens of people in my “getting started” process, I’m noticing some interesting things about the place.  Watch this space over time… I’ll take stock along the way and see if these patterns bear out and I still see them as important.

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.

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Thanks IDEO!!!!

The time has come for me to leave the amazing atmosphere of IDEO and jump into the bold, new world of start-ups.  Next week I will head south to Los Angeles and begin work at hulu, leaving behind the coolest place I’ve ever worked, a ton of fond memories, a pack of great friends, and a transformational experience in my professional development.  To all of the great people of IDEO who have helped me push the envelope of organization design, think crazy thoughts, and test the limits of prototyping on real people in real time:  THANK YOU.

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.

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Open source cars

wilder-young-frankensteinIn the immortal words of Dr. Frankenstein, played by Gene Wilder in Young Frankenstein, “It… could… 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! The Rally Fighter

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.

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Ready for some feedback?

 

UPDATE: for more tips on feedback check out the JFX Feedback category.

Last week we held the first session of the Rypple Learning Collaborative over at Mozilla in Mountain View.  We had participation from Method Home, Pixar, The Federal Reserve Bank, Kiva, Littler Mendelson, Electronic Arts, the Stanford d.School, Facebook, IDEO, and Mozilla.

We hope this effort generates some new insights and ideas that help people do a better job asking for and giving feedback.  So, we spent much of our first time together  sharing our direct experiences with people giving and receiving feedback and generating a list of observations about what seems to work and what doesn’t.

 

Feedback involves 3 roles, not just 2

Feedback involves 3 roles, not just 2

We framed our discussions with the idea that feedback involves not only the person asking/receiving and the person giving/providing, but a “crowd” of people around that pair.  Traditionally, much of the attention given to this topic is on the mechanics of the interaction between the two obvious players.  We included the third role to push our assumptions with a social systems view.

We all shared stories describing real feedback situations to help us recognize some patterns in real behavior.  Once we get a good picture of how people actually behave (not how they should behave), we will try to uncover what works well and what causes people problems.

An early insight from our shared stories is that it makes a positive impact on a feedback exchange when a person is ready for it.  That is, when a person is asking for feedback, they seem to be more able to handle it well than when a person gives it.  So this prompts the question, “What makes someone ready for feedback?”

Our next step is for LC members to begin conducting feedback experiments within their organizations.  From these experiments, we will expand our observations and gather more ideas to push our thinking.   We’ll start posting them on the Rypple Effect blog in a few weeks.

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Free advice for GM…er Penske #4

We’re moving downstream of the GM break-up so this post is obviously not going to help GM explicitly, so listen up folks at Penske!  This is about how to imagine SATURN as a (really) different kind of car company.  The brand heritage points us in this direction, but the operations history never quite got there.  While establishing itself as a new car brand, the most significant difference in their approach to running the company was the creation of a new dealer network from scratch, and calling it a retail network to indicate a stronger belief in customer service as a competitive advantage.

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

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.

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What’s really wrong with performance reviews

I’m sure many of you have seen the recent column by Jeff Pfeffer in BusinessWeek.  It’s a very nice analysis of the flaws in corporate performance reviews.  I respect and agree with everything he says in that article. And, I think there’s a more fundamental issue underlying the failure of performance reviews.  The whole concept is backwards.

Photo by Charlie//Alexandra White on Flickr

Photo by Charlie//Alexandra White on Flickr

It’s designed to manage performance as if it could actually be managed.  In order to actually manage performance, a manager would have to be present while the employee works a great deal of the time.  When a person starts to veer off “best practices,” the manager could then intervene with helpful comments and suggestions, or in extreme cases simply whack the person with a ruler to keep him in line.

Sounds crazy doesn’t it?  Managers can’t do that, they’ve got better managerial things to do.  Performance reviews are designed as if people were machines that need annual maintenance to fix broken parts or an upgrade to new software.

In a human-centered model, we’d assume that an adult worker of normal abilities would be able to understand the task at hand, and apply skill and judgment to meet work goals.  In this system, we’d assume that the person would be motivated to do a good job and be curious about how to do it better.  This might be a stretch too, but given the choices, I think this approach has more potential.

Yes, it’s a major shift in paradigm, but it’s one that aligns with the people who are already doing well, not with the people who are not.  That is, people who are successful at work and in life tend to ask questions, learn, and grow. Why don’t we design processes, tools, and practices that support the more successful people, not prop up the weakest links?  Call me Darwin if you will, but I believe this approach will help those who aren’t behaving in the most successful strategies shift towards them (not get left behind).

For a great example of this approach (helping successful people do what they already do better) is Rypple.  It’s a platform for asking questions and giving feedback that’s driven by the only person who really cares about your performance… you.

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United Breaks Guitars

United Breaks GuitarsNow this is how to leverage the web!  Check out a new song by Dave Carroll called United Breaks Guitars.  And for more on the story behind the song visit Dave Caroll Music.  We’ve all had frustrating experiences with poor service and it’s really amazing that such a scene can actually occur.  I myself had a small tiff with a stewardess… I mean flight attendant… on United recently.  She wanted my 2 year-old son to leave the seatback phone in the holder and I thought the relative value of the inflight phone service (nearing zero) and the distinct advantage of having a 2 year-old entertained while the flight boards (priceless) were a good trade off.  My wife was worried I’d get us kicked off the plane for an FAA safety violation (see Ben Stiller in Meet the Parents) but I backed down.

It is quite fun to poke at these people for being so mean, difficult, or otherwise ornery.  But the real issue isn’t the person involved, these incidents are symptoms of a much larger core issue.  Bad service comes from companies that don’t take care of people.  United isn’t about “destination management” they are about airplane management, so they emphasize mechanical and safety issues, not human ones.  Sure, they say they are there for “your safety” but really they are there to control things. When Southwest Airlines hit the scene with an emphasis on people and the customer experience, they immediately became the most profitable airline around.

Another example is the battle between Microsoft and Apple.  While Microsoft has a clear advantage in revenue and profitability (so far), it is clear that customers prefer the Apple experience.  When a single business can dominate an industry so fully like Microsoft or United, they can get away with poor service because customers can’t vote with their wallets.  But as soon as that advantage is removed, the crash and burn is inevitable (and fast)… as in Kmart versus Walmart.

I think this is so obvious I can’t imagine why other businesses don’t pull it off.  But just in case it’s not that clear to everyone, here’s a few reasons it works:

1. People make buying decisions, so treating people well leads to more favorable buying decisions.

2. The loyalty effect is an important driver of sustained profitability.

3. If you want your customers to be treated well, you MUST treat your employees well.  See the Service Profit Chain for more on how this works.

Got any more points to add?

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Free advice for GM #3-Put SAAB back on the edge

I was going to go with Saturn next, but a tweet from Diego on Metacool got me motivated to play with SAAB.  He says, SAAB should get back into rallying, which lends support to my understanding of this brand.

Rally to the edge

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).

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