Strategy. Innovation. Brand.
Innovation: Five Trends
Good ideas. How do we integrate them?
We know a lot about what innovation looked like in the past. What does it look like in the future?
That’s the question that Arthur D. Little (ADL) researchers asked of more than 100 Chief Technical Officers and Chief Innovation Officers in a recently published white paper. (Click here). The ADL researchers identified five key trends that should drive innovation management over the next decade. Today, I’ll summarize the trends. In the future, I’ll to delve into each one in more detail.
The most important trend — as rated by the CIOs and CTOs –is customer-based innovation — “finding new and more profound ways to engage with customers and develop deeper relationships with them.” B2B companies have traditionally emphasized customer-based innovation. After all, B2B companies have relatively few but relatively deep customers relationships. According to ADL, however, even B2C companies are now focusing less on the product itself and more on the “ownership experience”.
The second trend is proactive business process innovation. I read widely on innovation and almost everything I see has to do with product innovation. ADL says this is changing but that “there is still much to be done to develop a convincing innovation management approach that is sufficiently systematic and repeatable to generate new, innovative business models.” The first objective is to deliver “thick value” — long-term relationships with multiple touch points as opposed to “thin value” transactions.
Third is frugal innovation which may be better known as reverse innovation. Rather than innovating in high-value (and high-cost) knowledge economies, frugal innovation uses low-cost emerging economies to create products with “less” rather than “more”. Developing a new idea in India, say, will often result in a lower cost product than developing the same idea in Europe. Frugal innovation often changes entire supply chains rather than individual products.
Fourth is high speed/low risk innovation. The CIOs and CTOs say they expect even more time-to-market pressure in the next decade. Additionally, they think that product life cycles will continue to accelerate. At the same time,the customer’s ability to identify and publicize flawed products has expanded dramatically. So, even as the pressure to accelerate continues, the pressure to deliver flawless products also increases. How do you deliver high quality products in ever faster cycles? You change your business process. ADL expects to see more gradual product rollouts coupled with more pervasive and proactive post-sales service.
Integrated innovation is the last major trend ADL identifies. The idea here is to take innovation processes out of the New Product Development (NPD) domain and integrate them into all business processes and strategies. Among other things, this requires collaboration across traditional functional divisions. Organizational development experts will focus on building horizontal layers to replace vertical silos. Creating an Enterprise Architecture (EA) to manage knowledge and information could drive this trend.
So, five trends in innovation management – each is interesting in and of itself. Over the next few weeks, I’ll delve into each one in more detail and identify the prerequisites for success in each one. Stay tuned.
Innovation: Boeing versus Airbus
To innovate successfully, you need a strong vision of the future. What will your customers want in ten or 20 or 30 years? If you can picture that, you can start creating innovations today that will put you in the right place when the future arrives.
That’s one of the reasons I’m fascinated by the dogfight between Boeing and Airbus. They clearly have very different visions of the future of commercial aviation. Different visions produce very different airplanes.
Let’s start with what they agree on. Both Boeing and Airbus believe that the future belongs to the efficient — as measured by cost per passenger mile. Boeing has chosen to work on numerator — operating cost — while Airbus is focused on the denominator — passenger miles. This produces two very different airline experiences: point-to-point for Boeing versus hub-and-spoke for Airbus.
Let’s say I want to fly from Denver to Brisbane, Australia. There’s some demand for travel between the two cities but it’s not huge. So how would the experience differ on Airbus versus Boeing? In the Airbus scenario, I would fly to a regional hub — maybe Los Angeles — and then join 800 other passengers on an A380. The huge number of passengers dramatically lowers the cost per passenger mile. I would then fly the A380 to another regional hub — say Sydney — and then transfer for a short flight to Brisbane.
Boeing takes a different tack. Boeing essentially says, if there’s not much demand, let’s build a smaller plane that airlines can operate profitably on “long, thin routes”. Thus, the Boeing 787 — a light weight, twin engine, long distance plane. In the Boeing vision, I would board a 787 in Denver and — 15 hours later — get off in Brisbane. I can fly from point to point rather than transferring in mega-hubs.
Personally, I prefer the Boeing vision. But that’s not really the point here. The point is that your vision leads you to the type of innovations you deliver. Boeing and Airbus clearly have different visions of the future. Thus, they’re building very different planes. It may be that one is right and the other is wrong. Or maybe there’s room for both. No matter how it plays out, both Airbus and Boeing are making bet-the-company gambles on their visions.
So what’s your vision of the future? What will your customer want in one year? Or five years? Or 20 years? You can’t predict the future — at least not the details — but you can create a strong vision of what services and products your customers will want. That can help you create the innovations that will get you safely to the future.
By the way, the first long, thin route from Denver starts in mid-2013 — a non-stop flight from Denver to Tokyo on a 787. That’s a flight that Suellen and I need to take.
How Does a Southpaw Orient Himself?
You got a problem with southpaws?
In the United States, we sometimes call a left-handed person a southpaw. The term comes from old-time baseball. Before we had bright lights, we played baseball in the afternoon, when the sun was in the west. To protect the batter’s eyes from the bright sunshine, baseball stadiums were always oriented to the east. In other words, the batter was facing east while the pitcher was facing west. If you’re facing west, your left hand is on the south side of your body. Hence, left-handed pitchers became southpaws. Why we don’t call right handers northpaws, I’ll never know.
But what about the term, “oriented to the east”? Isn’t that redundant? After all, the orient is the east. The term to get oriented also comes from olden days. Before compasses were in widespread use, it was difficult to figure out where you were in relation to the four cardinal directions. This was especially true if you were on open water or in the vast grasslands of the central United States. You had no landmarks to relate to. Without a compass, the easiest direction to find is the east. All you have to do is get up early and watch the sun rise. If you miss the sunrise, you can look for afternoon rainbows — they’re always to the east. Either way, if you can figure out where east is, you’ve got yourself oriented.
One of the (many) nice things about Denver is that the mountains are very visible to the west. If you’re lost, just look for the mountains — then you’ll know where west is and you can figure out the other cardinal directions. So, we orient ourselves by looking to the … occident. It seems like we should be saying that we occident ourselves.
And then there’s our baseball stadium in Denver. It’s oriented to the occident — so fans can look west and see our majestic mountains. So that means southpaws are now northpaws. It’s all very confusing. Maybe that’s why our baseball team lost 98 games this year.
I like to study word origins and the history of language and I’ll write about these topics occasionally on this website. If you have good word stories, please share them with me and I’ll write them up.
Branding: The Value of Face Time
We need some face time.
Long ago, when I was a product manager at Solbourne Computer, we were trying to answer some nagging questions about our market. We built very fast symmetric multiprocessing Unix servers — back when symmetric multi-processing (SMP) was a brave new thing. In the early going, our machines were essentially hand built and we had difficulty meeting demand. As we worked our way down the manufacturing curve, however, we learned how to build machines more quickly. It soon became clear that we could not only satisfy demand but exceed it.
So we needed more demand. To identify potential sources of demand, we studied all of our sales to date. What patterns could we identify? Unfortunately, the raw data revealed almost nothing. There were no real patterns in terms of SIC code, geography, or industry. We had sold servers to national laboratories, astronomical observatories, large companies, medium-sized companies, universities, B2B companies, B2C companies, and so on.
Since we couldn’t identify any clear patterns in the data, we decided to go out and meet our early customers. We reached out to all of our customers and requested face-to-face meetings. Ultimately, we scheduled meetings with about 50 different customers.
As we returned from our customer calls, we held lengthy meetings to discuss the results. Again, no patterns emerged. Finally, someone suggested that we simply describe our customers. Were they fat or thin? Short or tall? Old or young? Frankly, I thought that was a dumb idea but it turned out to be brilliant. As we began describing the customers, a very clear pattern emerged. First, they were all men. Second, they were in their early to mid 30s. Third, they were all heads of their department. Titles varied but they were what we would today call the CIO. Fourth, and most important, they had recently replaced a much older manager. They were new in their positions and wanted to make their mark.
Why did they buy Solbourne? We were a small company with hot new technology — symmetric multiprocessing. But we also ran on the Unix operating system — a very safe choice. Further, the benefits of SMP were well understood — the concepts were proven though the technology was new. So newly installed, youngish CIOs could use us to demonstrate that the old regime was out; a new regime was in. They could look bold without worrying too much about failure. When we figured this out, one of our pithier sales reps said, “Geez… it’s like dogs peeing on a wall. They’re using our machines to mark their territory.” All we had to do then was to figure out where the new CIOs were. But that’s a different story.
So, what’s the moral of the story? We thought we were selling very sophisticated, state-of-the-art servers. But actually, we were fulfilling a psycho/social need. We gave our buyers signaling equipment. With Solbourne servers, they could signal that they had arrived. It was a sobering lesson in selling technology. It’s often not the technology that matters but rather the (often unspoken) need the technology addresses. It’s also a lesson in the power of face-to-face meetings. If we hadn’t met our customers personally, we never would have figured it out.
Do Generals Stray More Than Teachers?
Do generals commit adultery more often than, say, elementary school teachers?
The way we answer this question says a lot about the way we think. If you’ve been reading about American generals recently, you know that a lot of top ranking officers have been caught with their hands in the cookie jar. The facts are easily available to you. You can recall them quickly. Indeed, they’re very likely top of mind. (One of my students asked, in mock horror, since when have generals taken orders from their privates?)
On the other hand, when was the last time you read about cheating primary school teachers? It’s probably been a long time, if ever. Why? Because stories about cheating teachers don’t sell many newspapers. Stories about cheating generals seize our attention and hold it. It’s a great way to sell newspapers, magazines, and TV shows.
So, it’s easy for you to remember stories about cheating generals. It’s much harder to remember stories about cheating teachers. Based on your ability to remember relevant cases, you might conclude that generals do indeed stray more often than teachers. Would you be right? Maybe … but maybe not. All you’ve really done is search your own memory banks. As we all know, memory is fallible and can easily play tricks on us.
When we’re asked a comparative question like generals versus teachers, we often try to answer a different question: how many cases of each can I readily recall? It’s an easier question to answer and doesn’t require us to search external sources and think hard thoughts. Though it’s easy, it’s often erroneous.
I think I saw this phenomenon in action during the recent presidential election. My friends who supported Obama tended to talk to other people who supported Obama. If you asked how many people would support Obama, they could readily retrieve many cases and conclude that Obama would win. Of course, my friends who supported Romney were doing exactly the same thing — talking with or listening to other Romney supporters. I heard one person say, “Of course Romney will win. Everybody hates Obama”. I suspect that everybody he talked to hated Obama. But that’s not the same as everybody.
Relying on easily available information can help create the political chasms that we see around us. If you read a lot of articles about intransigent Republicans, you may conclude that Republicans are more intransigent than Democrats. That may be true … or it could just be a product of what you remember. Similarly, if you read lots of articles about Democrats undercutting the military, you might come to believe …. well, you get the picture.
What should we do? First, remember that the easy answer is often the wrong answer. It depends on what we remember rather than what’s actually happening. Second, start reading more sources that “disagree” with your point of view. All information sources have some degree of bias. Reading widely can help you establish a balance. Third, study up on statistics. It will help you understand what’s accurate and what’s not.
By the way, this post is adapted from Thinking Fast and Slow by Daniel Kahneman, easily the best book I’ve read this year. You can find it here.
(Note: I’ll teach a class on Applied Critical Thinking during the winter term at the University of Denver. Some of my teaching material will show up here in posts about how we think. They’ll all carry the tag, Applied Critical Thinking, so you can find them easily).
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