Why innovation must become business as usual

Lately it has been interesting watching innovation project begin in our clients.  There's really nothing new to report.  Typically what happens is that an executive becomes convinced that a market opportunity exists which must be filled, or that a competitive move must be countered.  There's a lot of discussion about the size and scope of the need or opportunity.  Then, one executive or senior leader becomes the advocate for the innovation opportunity.

After that, there's the typical work associated with any project:  building a plan, finding the right people to staff the activity, defining the scope of the work and anticipated outcomes.  Of course where innovation activities are concerned, this often means training the team to improve innovation techniques and skills and expanding the typical scope of work to include more disruptive ideas.  For every innovation project, however, there are corporate and cultural resistors.  These take the form of people who feel threatened by the scope or perhaps that the scope invades their turf.  These also take the form of people who believe their priorities should take precedence over the innovation activity, or who need the resources the innovation project is using.  These also take the form of corporate resistance to change and the fear of risk or failure, especially when targeting uncertain new needs or customer segments.

So, while an innovation project is often very similar to any other project at the macro level, it is exceptionally different from traditional projects at the micro level, and runs into much more resistance. That resistance comes from the mere fact that innovation is new and different, that the project may expand the scope of the product or service portfolio, that the outcomes are risky or uncertain, that the outcomes may cannibalize existing products, that other priorities were pushed aside to focus on innovation, and so on.  The amount of corporate fear and inertia is significant, and unless the team can overcome this resistance and inertia the innovation project faces limited potential scope or even failure from the start.

Now, compound this reality with the fact that innovation is increasingly more important, and needs to be accomplished more consistently and more frequently.  As competition increases, consumer demands increase, trade barriers fall, creating new products and services becomes ever more important.  Add to that fact that product lifecycles are decreasing, which means products must be replaced or at least reconfigured far more frequently than before.  When you add up all of the facts, it's clear that any firm must step up its innovation activity in order to remain competitive.

But we've demonstrated earlier that innovation projects face more fear and inertia than other projects and that means the projects often decrease scope or even fail to launch successfully.  In other words the cultural resistance and inertia is often limiting innovation at a time when innovation is ever more important.  What to do?

We've got to find a way to reduce corporate resistance to innovation, and remove or eliminate the inertia that many corporations retain.  While successful companies may feel secure with existing products and market share, that security is a myth.  Much of what the resistance and inertia is based on is on protecting a customer base and market share that is under constant attack.  Taking a reactive mindset and resisting change is counterproductive.  Good innovators already understand this and take the fight to the market through proactive innovation.  Good innovators don't hunker down, defend share and resist innovation.  On the contrary they attack adjacent markets and rework their products to keep competitors off guard and uncertain.

Corporate cultures have been allowed to become slow, comfortable and resistant to change.  We've got to rethink and rework corporate cultures to become more nimble, more hungry, more aggressive and open to embracing change.  As comfort levels rise and defensive mindsets creep in, inertia and resistance to change and uncertainty has permeated many firms.  The most common word in annual reports is "surprise" - too many firms are surprised by competitors, surprised by changes in their markets and competitive positions.  Rather than being surprised, these firms should create the change, introduce the innovations.

The only way I can imagine that these things happen is that corporate cultures embrace innovation as a regular, day to day occurance rather than an occasional, sporadic and problematic event.  This means the cultures must become far more comfortable with change and uncertainty, and that resistance levels fall.  Further, firms must become less celebratory and comfortable with their competitive positions.  Andy Grove became famous at Intel saying Only the paranoid survive, and he wasn't far from the truth.  Newton is right - objects at rest tend to stay at rest.  We need more, and more consistent, innovation motion to avoid inertia.  And, rather than the start and stop model we've used to date, which simply means each project faces the same inertia each time, we need a culture and capabilities that sustain innovation momentum over time.  Innovation must become business as usual, otherwise each and every innovation activity will be subject to resistance and inertia, which waste time and effort, reduce scope and threaten the success of each project.

Few firms enjoy kicking off an innovation project because they know the amount of resistance and inertia the activity will encounter.  As projects encounter the inertia, a significant amount of energy must be used to gain momentum.  Executives often aren't willing to provide the necessary energy to overcome the inertia, because that expenditure of energy comes at a cost - a funding cost, a status cost, a credibility cost.  These tangible and intangible costs matter.  We must lower these costs by reducing cultural resistance and corporate inertia, through better strategy definition, better communication, better innovation processes and outcomes.  Without consistent innovation, a corporation is basically defending a shrinking position.  The more its position shrinks, the harder it will be to consider the radical alternative, to take a new and better position.

Until and unless innovation becomes business as usual, reducing cultural resistance and removing or at least reducing corporate inertia, every innovation activity will be difficult and face unnecessary obstacles.

Is innovation generational?

I've been thinking a lot about the reasons why innovation seems so important and pervasive, and equally so poorly implemented.  Everywhere I go, executives are talking about the need for more innovation.  Elected officials at the federal and state level praise innovation.  CEOs and senior executives extoll the importance of innovation.  Entrepreneurs talk about innovation as the lifeblood of their businesses.  Yet for all the talk about innovation, there's a huge gap between what gets talked about and what gets done.  Too often, while innovation seems important, executive teams are distracted, multi-tasking, or feel that the competition isn't as compelling as we think it is.
Some of this thinking I believe is generational, shaped by the boomer generation, which controls much of the managerial and executive class in the US today.

Fairly or unfairly, the boomers have come in for some close examination as a cohort.  Clearly not every boomer reflects all of the flaws associated with the boomer generation, but as a whole the boomers are often thought of as acquisitive, self-involved and coming of age when a lot was made available to them and not much was asked of them.  This made me wonder - is innovation generational?  By that I mean are the baby boomers more or less likely to innovate than generations before them, or after them?  Then I thought, why not explore the idea?

For the record, I'm a tweener - born at the very end of the boomer generation and the start of Gen X.   Never really felt at home in either camp.  And this exploration isn't meant to say that boomers are bad, per se, or that Gen X or the Greatest Generation are good, necessarily.  Just to explore the settings in which each generation emerged and what shaped them.

Boomers

Boomers, you'll assert, are clearly good innovators.  Why, look no further than Steve Jobs.  Jobs was clearly a boomer, and there has been a tremendous amount of innovation over the last 20 years as the boomers took power in corporate America.  Yes, there has been a burst of innovation, but the vast majority of businesses today are headed by boomers, and the focus I find most often is in taking profits, cutting costs and living to fight another day rather than creatively exploring customer needs, developing compelling new products and exploring adjacent spaces.  Jobs is renown perhaps because he is an exception rather than the rule. 

Boomers may be poor innovators because they came of age at a time when the US was pre-eminent, when the economy was on the upswing.  Remember the movie "Wall Street" and "greed is good"?  Our stock market has swung upward dramatically, and at points in the 80s and through the 90s it felt as though the US had no competition.  There's no rationale to innovate when the competition is low and you are on top.  The boomers to the greatest extent have never experienced a truly competitive market, known hardships or had to fight for market share.  From the end of World War 2 to the end of the 90s, the baby boomer generation, at least in the US, has had its own way.  And I think that makes the boomers too self-satisfied, a bit too arrogant.  I remember people from my parents generation being uncomfortable with DINKS (Double Income No Kids) and Yuppies, thinking that these cohorts acquired wealth too easily, that they were too self-important and too self-satisfied.  Those aren't factors for innovation.  Of course not all boomers reflect these values, but as a whole the boomers were given a lot, and in many cases have acted to protect what they have rather than expand the pie.

Greatest Generation

Compare and contrast with the previous generation, the Greatest Generation.  These were the folks who came of age during the Great Depression and World War 2.  They lived in a time when many people weren't certain where their next meal was coming from.  They lived in a time of incredible uncertainty, between the rise of Nazi Germany and the subsequent rise of Communism.  These are the folks who put a man on the moon, who created many of the technologies that we take for granted today.  Their investments and sacrifices built a platform of technologies, systems and communication structures that we still use today.  They built the internet - or at least all of the critical pieces.  They put a man on the moon.  Their innovations power what the boomers did, and more.  They were curious, engaged, and had a great sense of community.  They knew hardship and worked hard to make their lot better.  Many started with little or nothing, then fought in a vicious war, then returned home to go to college, get married, start a career.  Their investments are what fuel much of what we do today.  I think their experiences created a cohort that was willing to struggle, willing to invest and face hardships, knowing that in those hardships and investments the future would be better.  Their attitudes were perhaps a bit conservative but always optimistic about the future.  America had a campy but "can do" spirit from this generation.

Gen X and beyond

Will the innovation and creativity pendulum swing back in the subsequent generations?  Is innovation a generational commodity?  Are generations more or less innovative based on their experiences as a cohort?  Gen X and the generations that follow them in the so-called Baby Bust after the Baby Boom are quite different from the Boomers.  They are less acquisitive, more concerned about each other and society and the environment.  They appear to volunteer more, and to be more socially engaged.  They've turned away somewhat from the overabundance many boomers seem guilty of - have you seen the TV show Storage Wars or Hoarders - and appear to maintain a more sedate pace of life.  Yet they are very interested in solving important problems, and we need them to get engaged in government, in academia and in industry, to revitalize and rethink structures and models.  After almost 50 years (1950 - 2000) the world is very different from what is was, and it remains to be seen if Gen X can be and will be as innovative as I think the Greatest Generation was.  They have the passion and energy that frankly I think is spent from the boomers.

Gen X and subsequent generations face a very different current and future environment. While the US economy is still strong, China is growing quickly and many other emerging economies seek a voice in the global economy.  Competition is fierce and partnerships are changing.  The US economy and the stock market are far more volatile than before, and many markets are saturated.  To make a "dent in the world" Gen X and beyond are going to have to create ideas and solutions that are noticeably different.

So where does that leave us

Currently, many senior executives are boomers.  They were born and raised in a period when the US was pre-eminent, could do what it wanted, had few competitors.   When you are on top, innovation isn't important, but staying on top is.  You reduce risks and keep profits high, to increase stock price and compensation.  Over the last 30 years we've had successive management fads including TQM, BPR, Outsourcing, Six Sigma, Lean, Right Sizing and so forth.  All in the service of profitability and efficiency, not in the service of innovation.  The more efficient companies become, the more risk averse they become, and boomers have never really experienced struggle or risk.

In addition, boomers I think are easily distracted, believing that they can successfully manage many competing priorities, when in fact they are often distracted by the urgent at the cost of the important.  That's not a failing just of the boomer generation, but I sense that boomers are perhaps more susceptible, given their belief in themselves and the fact that they've had a great half-century with less strife.  What will Gen X and subsequent generations look like, given social media, texting and the "always on" lifestyle?  Will that make them more socially aware, better at understanding needs and better communicators, or simply distract them even more?

In the end I do think innovation is generational.  Each generation is shaped by its environment, its experiences.  Those lessons, and the context in which the generation comes of age, the competitive landscape, the ethos of the group, shapes its ability to innovate and the choices the group makes when it has an opportunity to innovate.  I think Gen X and beyond are coming of age at a time when competition is intense, the US is a leader but not so pre-eminent, and there are many more emerging countries with far more capabilities than when their parents came on to the scene.  This heightened competition, and to some extent a rejection of the way boomers lived, may create more and better innovators.  Time will tell.


Innovation's Burning Platform

I write frequently, and counsel our clients repeatedly, about the need for a "burning platform" for innovation.  That is, a compelling need or opportunity that the executive team can define and communicate, that is urgent and important to the business.  A burning platform is often the best way to overcome corporate inertia and get a business moving into the more risky territory associated with innovation.  Without a burning platform, a compelling opportunity or reason, many corporate cultures simply won't embrace innovation.

That's why I thought it was interesting when Stephen Elop became the CEO of Nokia and declared that Nokia faced a "burning platform".  Just over two years ago, Elop became the CEO of Nokia at a time when Nokia was losing the mantle of cell phone handset leadership.  Elop wrote an open letter to his employees at Nokia, talking about the burning platform.  Nokia's dominance in cell phone handsets was at risk, and he was trying to create more awareness and emphasis.  Today, Nokia is the number two worldwide supplier of handsets, but barely registers in the smartphone market, where the majority of the profits reside.  The news today (September 3, 2013) is that Nokia will sell its handset division to Microsoft.

Letting a crisis go to waste

Rahm Emanuel, who was a key advisor to President Obama, was only the last in a string of executives who stated the obvious:  you don't want a crisis to go to waste.  In other words, use the crisis to create the change you need.  Elop did create some change.  He "bet the farm" on Microsoft's wireless operating system, when the other major players were going with Android, except for Apple of course.  In addition he focused on cutting costs, and cut a significant amount of costs out of Nokia's business.  But the drop in sales was actually faster than his ability to cut costs.

I'm going to argue that Elop let a crisis go to waste.  In a critical time when he had the attention of Nokia, he bet on an outside partner (Microsoft) that had little cellphone experience rather than bet on his own people to create something innovative and meaningful.  After making the bet on Microsoft, he then proceeded to cut costs rather than focus on meaningful product or business model innovation.  When he declared a burning platform, he had the mindshare of his employees, the impending change to overcome any corporate resistance to innovation and a storehouse of really smart, committed people.  Nokia could have become the innovative alternative to Apple.  Instead, Elop chose to outsource the operating system to Microsoft, forcing Nokia to become basically a hardware provider.  Once Nokia became a hardware provider, Elop focused on cutting costs rather than creating innovative handsets.  Now, both options have run out of steam.  Nokia has lost any hope of software leadership by banking on Microsoft, and has cut costs and people so quickly that significant innovation in the handset is off the table.

Money can't buy innovation

The second fallacy with this proposed merger is that while Microsoft may have money to burn, money by itself doesn't buy innovation.  Often the reverse is true.  Apple may be a telling story in this regard.  When Steve Jobs returned to Apple, Apple was approaching bankruptcy.  It faced its own "burning platform".  Jobs cut the range of product lines drastically and in addition started focusing on new innovative products - simultaneously.  This is what Elop and Nokia missed from the Jobs story - simultaneously cutting products and at the same time ramping up innovation.

No matter how much money Microsoft may have, merging a handset developer with few ideas and little innovation momentum with a software platform that to date has been rejected by the market doesn't add up to better products, better business models or innovation.  Nokia and Microsoft, while they have been partners, have different worldviews, different perspectives (North American and European) and will take time to merge to create anything new.  Meanwhile, Balmer is preparing to leave, and a scramble will soon be underway to sort out his successor.  If this seems like an awkward marriage of two suitors who lack innovation, and whose focus will be on internal integration and potential succession rather than innovative new software and handsets, you are probably right.

The most significant barrier to innovation in the proposed merged business won't be money, or technical capability.  It will be culture and arrogance.  Linking two companies that have traditionally been market leaders who don't listen to customers, will result in a larger, more distributed company with poor communication internally and no external capability to understand or assess customer wants and needs.  The ability to listen, and the capability to become a bit humble and naive about the markets are in high demand right now.

Setting fire to your own house

Perhaps in the end Nokia will be a case study of a firm that like Icarus believed they could fly and flew too close to the sun.  Many industry leaders become a bit arrogant and complacent, and are disrupted by new entrants they don't anticipate.  Many people don't know that Nokia experimented with touch screens similar to Apple's iPhone long before Apple did, but the idea was shot down within Nokia.

Nokia didn't become aware of its predicament until the platform was on fire.  It's an interesting object lesson, and one many innovators should take to heart.  Perhaps the job of innovators and senior executives (should they be different?) is to start lighting your own house on fire, to remind people that product dominance is not a given, not guaranteed, and any firm on top or near the top is there only temporarily unless they find ways to obsolete their own products and create new ones far faster than competitors.

Innovators, there are several key points here:

  1. Use an event or market condition to create a burning platform for change
  2. With that burning platform in hand, align your goals and resources for innovation
  3. Don't let a burning platform go to waste
  4. Change the culture, not just the products
  5. Don't expect to "buy" innovation.  It comes from insights, trends, understanding customers, not from technology or past history
  6. Set fire to your own platform before someone else does.  Don't get too comfortable.
  7. If you choose to "outsource" critical innovation differentiators (Nokia did with Microsoft operating systems) you'd better double down on innovation in something else that matters to customers.