Report 103

Your newsletter on applied creativity, imagination, ideas and innovation in business.

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Tuesday, 21 March 2006
Issue 78

Hello and welcome to another issue of Report 103, your fortnightly newsletter on creativity, imagination, ideas and innovation in business.

As always, if you have news about creativity, imagination, ideas, or innovation please feel free to forward it to me for potential inclusion in Report103. Your comments and feedback are also always welcome.

Information on unsubscribing, archives, reprinting articles, etc can be found at the end of this newsletter.



There is a tendency to think of creativity and innovation as being about – well – creating things. But, destruction can actually be a very creative act and lead to innovative results. Creative destruction, of course, is not wanton destruction. It is calculated, focused and aims to bring results of one kind or another.

There are three forms of creative destruction:

1. Destruction as innovation
2. Destruction to make way for innovation
3. Destruction of assumptions

Destruction as Innovation

Destruction as innovation is most often seen in operational process innovation. Streamlining an ordering fulfilment procedure so that it requires fewer steps, thus making the procedure faster and less costly is a good example of creative destruction as innovation.

Likewise, removing unnecessary features from a gadget in order to make it easier to use is a form of destruction as innovation. I do not know the design approach that went into the iPod. But its sheer simplicity suggests that there may well have been a project manager destroying suggestions of additional control switches and functionality.

Creative destruction as innovation can lead to a higher level of customer satisfaction. Recent Dutch research has shown that half of all electronic gadgets returned to the shops in the USA are not defective. The returned gadgets are simply too complex for consumers to figure out. So, they return the gadgets to the shop and demand their money back instead. According to Elke den Ouden, who performed the research as a part of her thesis at the Eindhoven University of Technology, the average American consumer will spend no more than 20 minutes trying to determine how a gadget works. If she does not succeed – she sends it back.

So, manufacturers would do well to start taking buttons, switches and unnecessary controls off their gadgets now and start focusing on core, easy to use and understand features.

Creative Destruction to Make Way for Innovation

Creative destruction to make way for innovation is the equivalent of tearing down a rotting old house in order to put a brand new house up in its place. Destruction for innovation is also often seen in operations. Dropping an old, inefficient process in order to replace it with a newer, more efficient process; such as replacing a filing cabinet with a web based database that can be accessed by any computer terminal within the firm, is an example of destruction for innovation. The filing cabinet is destroyed to make way for the database.

Fuel cell powered cars are a good example of destruction for innovation. The fuel cell powered car destroys the very concept of a piston engine and replaces it with a fuel cell powering relatively small electrical motors at each wheel. The fuel cell can be in a variety of shapes, such as a long, flat container at the bottom of the car, and the engines take up little space. As a result, the fuel cell powered car frees designers to completely rethink the shape and functionality of the motorcar and provides them with the opportunity for a level of innovation not seen in the automotive world since the early years of the last century.

Indeed, when the time comes to upgrade your product or service, it is sometimes better to destroy the existing version and start afresh. Doing so leaves much more room for improvement than simply adding new features. It also requires that you re-evaluate the core functionality of your product or service.

And if you think destroying your existing product completely and redesigning it from scratch is too costly an exercise, ask yourself this: what if your competitors were redesigning their product from scratch – in order to out-innovate you – right now?

Destruction of Assumptions

Destruction of assumptions is about ridding your mind of assumptions about your product, your customers or your market. For example, although Polaroid invented the digital camera back (for attaching to studio cameras), they missed out on commercialising their invention. That's because they assumed photographers would not be interested in digital imagery unless they could quickly print quality pictures. It never dawned on the people at Polaroid that photographers might be happy to look at images on computer screens and not need to print those images immediately. As a result, Polaroid is not a big name in digital photography these days.

I wrote about Destroying Your Assumptions in depth in Report 103 in July 2004 (you can read the article here:, so I shall not go into it in this article, except to say that it is important to review your assumptions about your customers, market and products on a regular basis. And destroy those assumptions that no longer stand up to reality.



To what extent does an employee work – and innovate – to benefit the organisation and to what extent does she work and innovate to benefit herself? Senior managers would like to believe that employees are a team of selfless workers who – in exchange for a monthly wage and odd benefits – work exclusively to the benefit of the organisation. As the organisation grows, the employee receives promotions, salary increases and additional benefits that encourage her to continue serving the company 100%.

The socialist cynic might argue that employees work solely to benefit themselves. Their interest is not in the organisation's prosperity, but in their salary and benefits. Workers do as much as necessary to ensure their salaries and regular promotions, but no more.

The truth, of course, falls somewhere in the middle. In most organisations, employees take pride in their employer, share in its vision and genuinely wish it to prosper. At the same time, employees want to maximise their benefits via not only salary, but taking on interesting responsibilities and acting in ways that benefit their progression up the organisational ladder.

Clearly, from the organisational perspective, the greater the extent to which employees work for the organisation's benefit, the greater the benefits to the organisation. This is important in terms of innovation. If employees strive to help the organisation grow, they will strive to devise and implement ideas that will help the organisation achieve that goal.

On the other hand, if employees feel disconnected from their firm and feel they gain no personal benefits from firm's growth, they will keep their heads down, keep new ideas to themselves and avoid rocking the boat.

In other words, if your firm is to be an innovative firm, then you need to maximise the extent to which your employees are working to the organisation's benefit rather than to their own benefit. While this may sound rather like programming people to become mindless company cogs whose only interest is the organisation's growth, the opposite is actually true. If employees believe in their organisation and strive to help the organisation achieve its corporate goals, they are likely to become more satisfied employees who feel they are an integral part of the organisation and that they are appreciated by the organisation.

Achieving this is easy in concept:

1. Sharing goals. If employees understand your corporate goals and how they can do their bit to help the organisation achieve those goals, they will do their bit. Thus, you need to communicate goals across the organisation. Managers must work with their teams to ensure each member knows what her bit is. Sharing goals is the single most important thing you can do to get employees working for the organisation's benefit

2. Ensure that if people help the firm grow, they also grow with the firm. This should be company policy and be well communicated. If an employee knows that her efforts on the organisation's behalf will result in greater responsibility, promotion and increased salary, then she will work to the organisation's benefit – because that benefit will come to her as well. During the dot-com boom in the late 1990s, start-up companies were able to pay talented employees very low wages together with promises of stocks and massive wages when the organisation prospered. Unfortunately, most companies did not prosper for long and employees today are more cynical of packages with little salary to start with, in exchange for riches should the organisation do well.

3. A charismatic leader can do wonders to bring employees over to the organisation's side and entice them to strive on the organisation's behalf. Provided the charismatic leader does not make false or excessive promises, she can be very effective. However, if employees eventually feel cheated by a charismatic leader who promises – explicitly or implicitly – benefits that never come, employees will soon turn against that leader and her organisation.

This is a problem for government offices whose success does not usually result in growth and profits, and whose success is not measured financially. A civil servant does not strive to turn her government office into a more profitable enterprise.

Unfortunately, as a result, many civil servants work primarily for their personal benefit – doing what is demanded of them and little more, keeping their heads down and not rocking the boat. Nevertheless, a manager of a government office can still push employees to work on the government's behalf in the same ways that a manager of a private company can. However, a means has to be found for demonstrating and measuring the organisation's success.

So, why are your employees working for you?



IBM's researchers have been busy looking at innovation recently. The IBM Global CEO Study 2006 is based on in-person interviews with more than 750 of the world's top CEOs and business leaders. The results are interesting to those of us who make a living out of innovation.

“The study found that CEOs are looking beyond growth through new products and services. They are increasingly focused on innovation in their business models and operations as key mechanisms for driving change.

“Indeed, CEOs stated that approximately two-thirds of their efforts are now targeted at business model and operational innovation. Furthermore, fully 61% of CEOs who have a primary focus on business model innovation fear that changes in the business model of a competitor could likely result in a radical change to the entire landscape of their industry.”

This is critical. The world's most innovative companies have not achieved their success solely through the introduction of new products and services. Rather, the bulk of their innovation has been through innovative operational efficiencies, improved processes and making those products and services better than their competitors can.

The world's most innovative car manufacturer is a prime example. Although Toyota's cars are not the sexiest in the world, Toyota's endless striving to improve their cars' quality and increase manufacturing efficiency – such as through just in time delivery of parts – ensures that Toyota is consistently one of the world's most profitable companies and their cars are trusted for reliability.

Interestingly, 76% of CEOs list business partner and customer collaboration as top sources for new ideas. In the past, CEOs were more likely to look to R&D for those ideas.

And companies that collaborate with partners and customers do benefit. “Companies with higher revenue growth report using external sources significantly more than slower growers do. Outperformers used external sources 30% more than underperformers. Additionally, CEOs stated that the top benefits from collaboration with partners are: reduced costs, higher quality and customer satisfaction, access to skills and products, increased revenue, and access to new markets and customers.”

For more information, go to

Commercial: Jenni idea management software service allows you to involve not only your employees in your idea management process, but also your business partners and customers. For more information about Jenni and how it works, please visit Or, if it's easier just send me a message or telephone me...



Harvard Business School Working Knowledge has a fascinating article on P&G's new innovation model. Worth reading at


Happy thinking!

Jeffrey Baumgartner


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Jeffrey Baumgartner
Bwiti bvba

Erps-Kwerps (near Leuven & Brussels) Belgium




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