JANUARY 17, 2007
Insight
By Jeneanne Rae
Don't Look to New Ideas for Growth
"Idea management" is fine, but it shouldn't be the starting place for innovation
In the annals of corporate innovation history, 2006 should go down as the year of "idea management." As innovation is more widely recognized as a new business discipline, executives are lining up to implement idea-management systems and software intended to harness the considerable insight and talent within their corporations.
To a certain degree, I see these efforts as admirable. Fostering new ideas is a recognition by management that, for one thing, they don't have all the answers and that a bottom-up approach can yield interesting opportunities.
Too many times, however, idea management is the end of the discussion on innovation. Having instituted the cheapest investment possible, management can wash its hands and go back to business as usual (i.e., the stuff their bonuses are based on). The innovation base is covered, some buzz is created, and thoughts and wishes are collected from around the system.
But what is the actual effect of all this idea management? In my view, idea management places too much emphasis on the promise of new ideas that most often come from one stakeholder perspective. At best they are flimsy and ill-informed, lack context, and don't confront the operational and cultural changes required to make them work. Considering the energy that goes into creating and vetting these insider contributions, relying on new ideas as your primary source of innovation is, in itself, a very bad idea.
In my view, if a company wants to become known for systemic innovation, idea management is but a small piece of the puzzle. Here's why:
Too many to manage. If the primary pipeline for innovation is insider-generated ideas, you are guaranteed to have too many ideas to act upon successfully. A suggestion box approach is too easy to ignore. Exploration dollars get spread too thin to understand any level of corporate implication for the plethora of candidates, while the big ideas can remain hidden and underfunded if treated like all the rest.
Random ideas are not strategic. Collecting random ideas may be an interesting exercise, but unless distinct energy is directed against solving a vexing corporate problem or exploiting a complex opportunity, you can count on low-level noise that won't get senior management very excited. Lack of enthusiasm on the senior management front ensures sponsorship but little support, as well as attention deficits, long cycle times, and high frustration levels all around. Maintenance is high while reward levels can be very low.
The quest for new growth platforms remains elusive. What most companies are looking for out of their innovation efforts is new growth platforms. By definition, a new growth platform is an offering that is fundamentally different in terms of its value proposition and production processes than what the company has done in the past.
Moreover, in order to provide significant growth, the platform must suit the requirements and interests of the market, and the company must find a way to generate competitive advantage. With the technology that's at our fingertips today, platform development can also involve the development of new marketing channels, business models, and/or network partners. It's new, it's different, and it's not easy.
I know we're all tired of hearing it, but Apple's (AAPL) iPod product family is one of the best examples of a new growth platform we've seen in recent years. Where nothing existed in this company formerly known for user-friendly PCs, Apple created something completely new that involved hardware, software, services, and accessories. A recent study by Kaiser Associates said the iPod—along with other Apple products affected by its halo—created $70 billion in shareholder value in just three years.
Mark Stein of Kaiser Associates notes, "What is especially impressive about Apple's feat is that [Apple] did it with an R&D spend that is one-tenth the size of Microsoft's annual spend, and that they did it during a period of otherwise flat industry performance. This clearly demonstrates the approach, the techniques, the strategy, and the focus matter far more than the how much [you spend]."
Idea collection will not get you anywhere near this level of success. Undoubtedly, music was a major strategic push for Apple. They channeled their ideas and creativity to one place—and won big. In the process, I bet they had lots of ideas—but they were focused ideas that fell naturally into an overarching corporate strategy, a strategy that included focusing on a space that its traditional competitors—i.e., Microsoft (MSFT)—were neglecting.
Don't start with ideas. The point here is that ideas shouldn't be the starting place for innovation. Rather, the place to begin is corporate strategy—where the goals and aspirations for the organization are normally set. While I am not a fan of collecting random ideas, I am a big fan of idea generation against focused objectives. This is where the fusion of business strategy and classic design thinking can pay off in an enormous way. Below I describe how this fusion of integrative business/design thinking works.
An innovation agenda is key. It is my experience that a good innovation process can yield results on just about any topic: product, service, cost reduction, more efficient production, customer delight—you name it. The trick is to have your sights set on an objective that reflects exactly what you are trying to achieve. For Apple, this might have looked something like, "Becoming huge in the music business." Being more innovative is simply easier when you know what you are after. Leadership plays a big role here—it is the responsibility of management to articulate priorities. Therefore, given limited resources, saying what you're not going to do becomes an important reference point as well.
Great ideas require insights. Once an "innovation agenda" has emerged, the next step is to start collecting stakeholder (notice I did not say customer) insights. Customers are but one stakeholder. They are important, yes, but should not be the sole source for inspiration. In addition to customers, other stakeholders can be service providers, installers, retailers, sales people, economic buyers, operations, etc.
The point is to identify the people that surround the opportunity 360 degrees, and bring all their perspectives to one place to be analyzed and synthesized at the same time. Cultural anthropologists, researchers, and designers do this work especially well. For certain, Apple had to have considered the record companies when developing its iTunes business model.
Strive for the patterns as well as the ideas. With a 360-degree understanding of the opportunity space, let the idea generation begin. Forget the type of lone idea that is delivered over the transom. Go for quantity. My experience is the best brainstorming sessions rely on a small, diverse set of people who spend a good deal of prep time getting immersed in the problem, and don't expect to solve every issue in one session.
There should be lots of brainstorms, in fact—and it's best to address the problems identified in the stakeholder-insight stage in separate brainstorms with different participants. In brainstorming, understanding the patterns exposed is almost always more useful that identifying the best ideas.
Visualization is the primary communication tool. Next comes concept development and prototyping. Visualization techniques are especially important in getting ideas to come to life. This means that significant investments in visualization should be expected no matter what kind of business you are in. This is a hard nut to crack for the service sector it seems, but it's a capability well worth developing given the high price of failure.
The main reason is that visualization is a crucial communication tool. Not only does it help project teams articulate a shared vision for the concept, that well-articulated vision can be used to communicate outwardly to stakeholders. When stakeholders are given a chance to contribute their thoughts, then the team is the beneficiary of important feedback and improvements. Iterations of the evolving concept keep things in a state of continuous improvement until specifications must be frozen so design development can begin.
What great companies do. Systemic innovators such as BMW, Starwood Hotels (HOT), Google (GOOG), and others recognize the value of new ideas that come from their ranks, but they don't place all their eggs in one basket. These companies have developed sophisticated market-sensing mechanisms that inform their innovation agendas. Innovation is given a great deal of attention at the senior management level, a widely understood process and operating model for innovation exists, and investments in tools and know-how for innovation is significant. It's definitely not the cheapest solution, but it's what allows these companies to stay ahead of the game in terms of their growth prospects and shareholder value.
If you are interested in hearing more, particularly about some of the service-centric tools and techniques for innovation, join me as I chair a new IIR/PDMA conference in March, 2007: Service Innovation Design and Development (www.iirusa.com/service). You will hear many stories from leading corporations about the issues inherent in building a robust innovation capability.
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