The dangers of innovation peer pressure

My growing fear is that innovation is on course to become the fad of the day in the same way quality was in the 90s.  Having said that, I expect that Braden Kelley’s new book – Stoking Your Innovation Bonfire is going to prove a very helpful guide for organizations making decisions about where innovation is relevant.

For those of who missed, or were too young for it, the quality movement, it was everywhere. There was a big quality award called the Malcolm Baldrige award that top companies did everything they could to win. The premise was that everything needed to he high quality and at the time as a young Accenture employee, it actually seemed to make sense. Why wouldn’t you want everything to be high quality?

These days it’s really obvious to me why you wouldn’t want everything to be super high quality, and there are a couple of basic reasons:

1. Investing to make everything high quality is very expensive
2. Only a few parts of your organization have a direct impact on overall organizational performance, and in a lot of cases, those are the only ones it makes sense to make high quality.

I made a similar point two years ago as the recession started rolling and people wanted to cut costs everywhere. I would say “cutting costs across the board is not a strategy.”

Which brings me back to innovation and the subject of this article.

The simple answer to this complex question is that for some companies, it’s life and death to treat innovation management as a core skill, and for other organizations it borders on frivolous.

But before we get into that, we need to define innovation. My simple definition of innovation is when the product or service that is the result of the innovating doesn’t resemble what was there before it. The ATM doesn’t resemble the experience of getting cash from an actual bank teller. Getting a rented movie mailed to you doesn’t resemble the experience of renting a movie at a store, and certainly doesn’t resemble the experience of going to the theater. I see innovation as being on a spectrum of change, where it’s at one extreme, and at the other extreme is making a minor modification to the work, along the lines of a minor scorecard change. In the middle between the innovation and the scorecard change is what I call a project where the work undergoes some change that is noticeable, but you can still recognize what was there before it, much like a house remodel.

Now I’d like to get concrete about this subject with some real examples.

Pharmaceutical companies are at the extreme in this case because their products are all patented, which means the patents expire, which means they need to be constantly innovating for the next big drug. So they need to be absolute rock stars at managing innovation. In my first book Rethink, I talk about how one pharmaceutical company realized that ideas for new products was at the heart of innovation and they opened that up to the outside world as a way to dramatically increase the flow of new ideas with great success. But this is limited to new product development. There will be times when they may innovate in the way people access their drugs, or the way they buy them, or something along those lines, but those shouldn’t be viewed, or treated as a core competence.

Manufacturing companies, though they have less of an issue with expiring patents, also often live and die by innovation, so viewing innovation management as a core competence makes all the sense in the world – in the area of product development, not everywhere in the company.

Airlines are an industry where innovation almost never happens because it’s essentially a commodity service these days and the only differentiation is price – everything else they do can be copied by other airlines. The planes themselves are another story – but that gets us back to manufacturing which I already spoke to above.

Retailing. Nope. Which isn’t to say it never happens in retail, but it’s usually at the operating model level where a company differentiates and makes its money, not day-to-day innovation. Alice.com is a company I have written about in the past that figured out how to sell consumer packaged goods at cost with free shipping (they can charge a ton for advertising because they give the data about age, gender, and ZIP code about who responds to the ads). That’s a great model, but that’s essentially where the innovation started and stopped for them – I think they will be really successful. Costco is also a favorite company – they figured out how to make money by not making any money selling the products that they sell (they make it on their membership dues).

I am not going to cover every industry, but you get the idea.

The “how” question is easier, in my view.

Once you know where you need to treat innovation as a core area, then it’s a matter of mapping out the work, and who needs to do it, and how to start to get best practice level metrics on it. There are five basic areas of work for innovation:

1. The need. You need to know where the problems and opportunities are where innovation is needed
2. The Ideas. A person or a group needs to come up with the various ways in which to innovate at a level that meets the need.
3. Creation. From idea to reality, understanding what it takes to productize it or reproduce it in a cost effective way can be a chore
4. Execution. Rolling out the innovation takes work and discipline, and doing this in a programmatic way takes time
5. Management. Overseeing the innovation once it has been rolled out is key. Knowing when to tweak it with a scorecard change, whether it needs a project, or whether it’s time to once again innovate

So organizations need to look at these and decide which ones it needs to own and be good at. As I mentioned before, pharmaceutical companies have realized they can open up the idea end to the outside world as they manage the rest of the process.

-Ric

P.S. Look for my new book Surviving Business Earthquakes, exclusively at Starbucks starting in October