Report 103
Your newsletter on applied creativity, imagination, ideas and innovation in business.
Tuesday, 16 June 2009
Issue 151
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.
GUEST WRITERS
This week we are privileged to have thought provoking articles from three very knowledgeable guest writers.
Note copyright of articles by guest writers remains with the writers themselves. If you wish to reproduce these articles, please contact the authors directly.
If you would like to contribute an article to Report 103, please e-mail me and tell me about your proposed article.
THE CURSE OF THE FIRST-MOVER: WHEN INCREMENTAL INNOVATION LEADS TO RADICAL
CHANGE
By Dr. Thierry Rayna and Dr. Ludmila Striukova
Synopsis
(you may download the entire paper from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1404015)
The literature establishes a strong link between radical innovation, first-mover advantage and market dominance. This belief that both radical innovation and being the first mover are an absolute necessity for companies to dominate the market, although valid for many years in many industries (and still well-founded for some of them) seems, nowadays, to be greatly undermined, in particular in the case of high-tech industries.
Indeed, the recent history of high-tech industries provides numerous examples when, despite their ability to come up with radical innovation and despite being the first-mover, companies failed. For instance, Apple, nowadays one of the most successful high-tech companies, nearly went bankrupt in 1997 and if, at the time, few bet on its survival, nobody would have imagined how successful it would become. Yet, by 1997, Apple had invented and released: the first PC with graphical interface, the first mouse, the first laptop, the first Personal Digital Assistant, the first digital camera as well as many other radically innovative products. More surprisingly, the resurrection of Apple and its recent success did not come from releasing even more radically innovative devices, but instead by incrementally improving existing products: MP3 players (iPod), smart phones (iPhone), etc.
Likewise, Google, nowadays the most successful internet company, has never produced any radical innovation, but owes its success to incremental improvements of existing products (search engines, webmail, maps, word processing software, etc.). Yet, the products introduced by Google, despite being only marginally innovative, have led to landslides and have profoundly and radically altered the course of the industry.
Of course, radical innovation is still required for new products to replace completely old ones or for new markets to emerge. However inventors of radically innovative products are not always the ones who reap the benefits of the innovation they have sown. In fact, the example of technology-intensive industries demonstrates that incremental innovation can influence the industry in a far more significant way than radical innovation and can also be more beneficial to companies.
This article investigates the relation between radical innovation, incremental innovation and market dominance. In particular, it explains why radical innovation and first-mover advantage, which are so vital in other industries, not only often fail to provide competitive advantage in high-tech industries, but might even weaken the companies' positions. The article examines the key determinants that explain why first-movers, promoting radical innovation, may face a disadvantage in comparison to followers, that use incremental innovations.
The theories developed are supported by four case studies of products released by Apple, two of which correspond to radical innovations (Lisa, Newton) and the other two to incremental innovation (iMac, iPod).
Read the entire white paper at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1404015
About the Authors
Dr Thierry Rayna is a Senior Lecturer (Associate Professor) in Industrial and Business Economics at London Metropolitan Business School. He holds a PhD in Economics and was, for three years, a Doctoral Research Fellow at École Polytechnique (Paris). His past research experience includes working as a Research Associate at Imperial College London and being a Research Fellow at the University of Cambridge. His research investigates the economic consequences of the nature and characteristics of digital goods such as films, music, software and information. Dr Rayna's research has been used in numerous governmental reports (European Commission, U.S. Federal Trade Commission, French Ministry of Culture) and he has served as an advisor for major companies of the media, telecommunication and cultural industries.
Dr Ludmila Striukova is a Lecturer (Assistant Professor) at University College London. She holds a PhD in Management from the University of London. Her previous experience involves working as a Market Analyst for a statistical agency and as a Research Fellow at King’s College, University of London. Her research interests include intellectual property rights and social capital. Dr Striukova's research activities have led her to work with a large number of FTSE 100 companies, as well as with governmental bodies and the European Union and she is also in regular contact with CEOs of start-ups as innovation and entrepreneurship are part of her interests.
INNOVATION PROCESS MANAGEMENT: IT'S NOT JUST ABOUT IDEAS
by Andrew Greaves
Where are you today?
How would you describe your innovation effort to an outsider?
How much of your collective knowledge and brain power is utilised?
Do you involve any external stakeholders? How are you going to create your next
competitive advantage? Is it an ongoing initiative?
There are many types of organisations and there are also many ways they can innovate. Innovations can be centred on your products, services, processes, structure, relationships and strategy. Whatever the focus you will need to follow an innovation process. A project is not sufficient. It has a definite lifespan and whilst its neatness and tidiness might initially appeal, an organisation should be looking to sustain its innovation effort in order to provide an evolving competitive advantage.
Innovation is a hot topic currently. Virtually every organisation trumpets innovation's importance to them but the reality is often very different. Why is that? In time management terms innovation often falls into the "important but not urgent" quadrant. This is potentially a tragic perceptual error. Every commercial entity should be striving for the holy grail of profitable growth. Growth will occur through the acquisition of another company or through innovation. Leaving the former to the financial experts we can see that the whole company can be engaged in identifying ways to innovate. This, as mentioned above, can be in many areas but also importantly it can be in finding ways of cutting costs which clearly helps in the profitability aspect.
Before we look at the innovation process itself bear this in mind. Employees appreciate the need to innovate and will rise to the challenge if helped correctly. However, a bad system will always defeat a good person. Let's look at how you can fully engage your team and indeed capitalise on your very own extended team.
What Do You Need to Do?
So assuming we appreciate the vital importance of "doing innovation". What is needed?
Many people think innovation starts with the generation of ideas but we should go back one stage further. How we frame the innovation challenge is vitally important. There is normally a headlong rush into generating ideas but if the challenge statement doesn't identify the correct problem or opportunity then it is irrelevant how good those ideas might be. The recently departed Arthur VanGundy's book "Getting to Innovation" provides an excellent guide to the process of challenge framing and I'd strongly recommend it to anyone involved in the innovation process. (Editor's note: you may also download VanGundy's article on the Care and Framing of Strategic Innovation Challenges, which became a part of the cited book, at http://www.creativejeffrey.com/creative/VanGundyFramingStrategicInnov.pdf – PDF document; approx 338KB)
Whilst every organisation is different, the principles behind its innovation process apply to all. It should be encouraging (and orchestrating) all its employees to participate, share and collaborate. It should be capitalising on people's different ideas, skillsets and viewpoints. It should be establishing the kind of community that facilitates conversations in which creativity can flourish. It should recognise that innovation is cumulative - once an idea is shared it will be enhanced by the contribution of others.
For best results we require a system that posts a time-framed challenge to all employees. This is very different from any kind of suggestion box where at any stage, anyone can post any idea, on any subject! This non-engaging, focus-lacking, random process should be abandoned now that superior methods exist, especially now we have the catalyst for innovation known as the internet. Ideas must be captured and shared enabling everybody to collaborate on, and feel ownership of, their development. But why restrict ourselves to just employees? Any stakeholder could be invited into the system to contribute their unique perspective. This opening up of your innovation process can extend all the way through suppliers and clients to customers and indeed non-customers. Your innovation team can be as large as you see fit.
What Do You Do with all Your Ideas?
These ideas are still too fragile to be let loose. They are only the raw material for the final solutions. The next stage in the process is to evaluate these ideas. Differing degrees of rigour should be applied to an ever dwindling number of stronger ideas. Identify those with potential and enhance them. Identify those with weaknesses and counter them. These evaluations can be done by peers or later on by expert evaluators with strengths in the relevant areas.
Now we enter the phase that really is unique to each organisation and their sector. The selected ideas need to be tested and developed even further. We should be producing many iterations of prototypes and feeding all learning back into the process. Prototypes bring a possible solution to life and will enable testers to provide much better feedback.
If we reach the point of having an innovation that is ready for launch then again there will be unique factors impacting on how this is done. Again, if small, discrete markets can be targetted then it may make sense to conduct a soft launch before hopefully going ahead with the full launch to market.
What do you call it?
We have looked at the journey from identifying the business challenge through
framing, idea generation and evaluation, culminating with implementation. Not
surprisingly, this is called "innovation process management"
and is both an effective and efficient approach to embedding innovation at the
heart of your organisation. Whilst innovation practitioners call it innovation
process management your organisation can call it anything you want! Indeed,
to demonstrate the importance of employee participation maybe the first challenge
could be to invite potential names for the organisation's process!
So, assuming you've read this article (you have haven't you?) what are you going
to do to help the innovation process at your organisation? I'll leave
you with two final questions.
If not you, who? If not now, when?
About Andrew Greaves
Andrew "Greavsie" Greaves is the founder and president of the Idea Hunter (http://www.theideahunter.co.uk), a London based specialist creativity and innovation consultancy. The clients he has worked with include Skymedia, GMTV, Cartoon Network, Bacardi Martini, Imperial Tobacco and a number of media and PR agencies whose names normally consist of three initials.
THE INNOVATION PIE AND HOW TO BAKE IT
Every now and again, I come across the term: “innovative employee”. It might be a firm looking to hire an innovative person for a position, it might be a prospective employee trumpeting her own value or it might simply be a discussion point in an on-line conversation.
But the truth of the matter is, individual employees are seldom innovative – at least not in terms of their employers' interests. Indeed, if an employee were truly innovative, she and her employer would do better to part company. We shall see why this is the case in a moment.
When people talk of an individual innovative employee, they usually mean a “creative employee” that is a person who has lots of clever ideas applicable to the company. However, most definitions of business innovation are similar to mine: the development of creative ideas into implementations that add value to the firm – typically by being profitable through reduced operational costs or additional income or both.
An employee who is capable of devising creative ideas, developing them in detail, evaluating them and implementing them (for more information on the innovation process, see Andrew Greaves's article above) does not need an employer. Rather she should be self employed as she is delivering the entire value chain herself! She can earn more income on her own and she is never going to be happy in an organisation which is only likely to squelch her capabilities.
Thus the company seeking innovative employees should not be looking for innovative qualities in individuals. Rather it should be enabling employees to collaborate across the enterprise. And this is more a matter of communications than seeking specific innovative or creative individuals.
Developing Ideas
The creative component of innovation is generating and developing ideas that solve specific business problems or help achieve desired goals. While individuals can and should contribute ideas, the best, most viable ideas are almost always the result of collaboration. In smaller firms, such collaboration can be achieved through internal meetings and discussions. In medium and larger firms, an innovation process management software or similar tool can help facilitate cross enterprise collaboration that ensures developed ideas are the result of the varied expertise available in the firm.
As ideas develop, it may be necessary to call on experts in order to evaluate viability or simply to ask how a certain process might be accomplished. When, for example, a new product idea germinates in the research and development (R&D) division of a company, this is not a problem. In most medium to large firms (which will be the focus of this article), people are likely to best know colleagues in their own and closely associated divisions. But, they are far less likely to know people in less closely associated divisions.
Hence, continuing in our example, when a new idea germinates within the sales division, perhaps as the result of a sales executive discussing needs with a client, it is important that she is able to talk to R&D people about her ideas and how they might be accomplished technically.
If such lines of communication are open, this is not a challenge and the sales executive's creative – and potentially innovative – idea is far more likely to become an innovation. However, in many firms, such lines of communication are not open or are very complicated. A firm I worked with many years ago had a very complex process by which employees in one division communicated with those in another. In this example, the sales executive would have to formulate her enquiry into a written document which she would submit to her manager. Her manager would submit the idea to the R&D division manager who would pass it on to the appropriate subordinate for a reply. Not surprisingly, you will never, ever see this company's name in a list of innovative firms!
From Concept to Implementation
Once a concept is developed, evaluated and found to offer value potential, an implementation plan needs to be followed (if the appropriate process already exists) or drawn up (if one does not). From there, the concept needs to be implemented. In the case of new product ideas, this will typically involve a great many steps: the development of prototypes, setting up production facilities, communicating with people across the sales chain, working with marketing and more. Again, the better people communicate with each other, not only in their own divisions, but also and more importantly across divisions, the greater the likelihood of innovative success. With good communications, the innovation process never stops. Product ideas are constantly improved, opinions are enthusiastically sought and listened to. Problems are identified early and solutions collaboratively found, developed and implemented.
Baking the Innovation Pie: Communications
Assuming a culture of innovation exists – at topic we've written about here in the past. (See, for example, a Dozen Ingredients for a Culture of Innovation in the 7 April 2009 issue of Report 103 http://www.creativejeffrey.com/report103/archive.php?issue_no=20090407), the essential ingredient for effective innovation is: communication.
People need to be able to find people with particular expertise and feel comfortable in talking to them even when they do not know the each other. This can be accomplished in various ways.
An innovation process management software application can provide a platform not only for generating, developing and evaluating ideas, but also for cross enterprise communication. In larger firms, in particular, such an application can facilitate communication focused on solving business problems, developing ideas and implementing ideas.
Multi-disciplinary teams ensure that people in various divisions work with colleagues in other divisions and communicate with them regularly. Thus, in the case of the sales executive with the brilliant idea, even if she is not in a team with people from R&D, one of her colleagues will be. The colleague can then make introductions between the sales executive and R&D people.
Training in communication and networking. Most companies today are not lacking in communication tools. Indeed, some have too many tools, with blogs, twitter, chat and more. However, sometimes it seems everyone is simply making a lot of noise and no real communication is occurring. Developing company policies and providing training in using tools to facilitate communication, rather than noise, ensures people can use existing tools to communicate with anyone else anywhere in the enterprise.
Conclusion
Assuming your firm has a culture of innovation in place – and if management seeks innovative employees, this is likely the case – then management should not in fact be looking for individual innovators. Rather it should be improving its internal communications methods and processes. Not only will this vastly improve innovative results, but will bring many other benefits as well.
THE INNOVATION PROCESS MANAGEMENT WEB APPLICATION: JENNI
Jenni is an innovation process management web application designed to provide medium to large firms like yours with an innovation process structure and a system for managing it.
Jenni is not simply a suggestion tool, rather it covers the entire innovation process, from setting up ideas campaigns based on specific business needs, to providing a collaborative idea development space to providing a suite of evaluation tools that enable you to identify which ideas offer the greatest potential value – and much more.
Jenni is provided as a comprehensive service that includes Jenni, regular upgrades, support and a dedicated innovation coach with the mandate to ensure your innovation process is a success!
For more information about Jenni, to arrange a demo or to talk to an expert near you, visit http://www.creativejeffrey.com/jenni/.
We look forward to helping you manage your innovation process efficiently and effectively.
ARE YOU AN INNOVATION CONSULTANT?
If you are providing innovation services such as consulting, training or coaching and want to add a great idea management software solution to your portfolio of products and services, contact me and let's talk about how Jenni can help your clients innovate better – and help you gain new clients.
You benefit from our generous commission programme, marketing on the popular www.jpb.com web site (over 150,000 page hits/month) and collaborating with a fantastic global team of innovation, marketing and sales experts (http://www.creativejeffrey.com/about/index.php). In addition, by packaging your services with Jenni, you can provide your clients with value added innovation services that help them increase profitability.
It's a fantastic win-win-win scenario for your, your client and jpb.com!
LATEST IN BUSINESS INNOVATION
If you want to keep up with the latest news in business innovation, I recommend Chuck Frey's INNOVATIONweek (http://www.innovationtools.com/News/subscribe.asp). It's the only e-newsletter that keeps you up-to-date on all of the latest innovation news, research, trends, case histories of leading companies and more. And it's the perfect complement to Report 103!
ARCHIVES
You can find this and every issue of Report 103 ever written at our archives on http://www.creativejeffrey.com/report103/archives.php
Happy thinking!
Jeffrey Baumgartner
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Report 103 is edited by Jeffrey Baumgartner and is published on the first and third Tuesday of every month.
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