Are you dependent on other’s best practices?

best-practices

I often wonder if “best practice” is actually a hidden drug within our organizations that everyone simply craves to be taking.

Why do so many advisory organizations promote best practice? Simply because those in the organization constantly feel under pressure to demonstrate why they are falling behind or keeping ahead of their competitors.

They crave knowing best practices, but tell me what really is the best practice of others really achieving?

If you are behind, best practice informs you and you go into a frantic mode to try and catch up. By the time you have achieved the best practice, it is simply out of date as those practising this have most likely moved even further on.

If you are the ones attributed with a best practice it can usually create a level of complacency, while you sit back and bask in the afterglow, or you rack your brains to extend this ‘leadership’ position in even better ways, determined not to relinquish this recognition and start to ‘mess’ with these practices.

Often the result is you can lose sight of why you were a best practice as you upgrade to the next level of automation through technology, forgetting that part of the best practice might have been the personal touch and engagements you had with your customers, dealing individually with their specific problems, as you race to automate these, so you can keep ahead in practice.

I argue you have to be very careful with best practice

Firstly organizations need to move well beyond their lazy reliance on best practice comparison and they need to find better ways to explore emerging practices. But that takes many into the realm of increasing uncertainties, and most people and organizations are not trained for this exploration and experimentation, yet it is the place for gaining leading practice.

quote-other-organizations-best-practices-are-not-yoursIt is just so easy to copy, yet how often do we fail to recognize all the contextual factors that went into making a specific set of (best) practices in one organization as those another organization simply believes it can blindly copy?

Other organizations good practice is their practice, in their circumstances and in adapting the practices to suit their market conditions and I guarantee these are not yours!

Your practices are all that matter to your customer, so keep focusing there

Of course best practice has its comparative use to gather intelligence, to gain competitive understanding of where they are in their development. But these are their practices and to simply set about to adopt these as your way forward is just a huge, expensive mistake in many cases.

I believe if you are focusing on the good and emerging practices within your own organization as the area to focus upon, to leverage and understand. Then to measure these with what your customer expects, your market is telling you or your ability to engineer real growth or not. Those become your practices for learning and wanting to improve into those that make your organization really work effectively in its context.

Then applying, experimenting and learning from novel practices that provide growing confidence in creative thinking.

Also give some thought for next practice, those practices that prompt reinvention. They start such totally fresh thinking; they challenge existing paradigms and move you towards considering new business models.

The Cynefin Framework

One framework I strongly relate too is provided by www.cognitive-edge.com with their Cynefin framework. It places ‘practices’ in its appropriate domain. 

Cynefin Revised 1The Cynefin framework has five major domains

The first four domains are our most relevant for seeking out the appropriate practice:

Simple, recently renamed the Obvious space, in which the relationship between cause and effect is obvious to all, the approach is to Sense – Categorise – Respond and we can apply best practice as it is more for incremental, the space where you are working with more of the ‘established’ routines, extracting the efficiencies and repeating established practice.

Complicated, in which the relationship between cause and effect requires analysis or some other form of investigation and/or the application of expert knowledge, the approach is to Sense – Analyze – Respond and we can apply good practice.

Complex, this is the domain, in which the relationship between cause and effect can only be perceived in retrospect, but not in advance, the approach is to Probe – Sense – Respond and we can sense emergent practice.

Chaotic, in which there is no relationship between cause and effect at systems level, the approach is to Act – Sense – Respond and we can discover novel practice.

The fifth domain- The fifth domain is Disorder, which is the state of not knowing what type of causality exists, simply unaware of what you need to do and in which state you should apply. Often people will revert to their own comfort zone in making a decision adding more complexity to the disorder.

In full use, the Cynefin framework has sub-domains, and the boundary between simple and chaotic is seen as a catastrophic one: complacency leads to failure and tumbles into chaos.

Dealing with different types of innovation really works in this framework

For incremental innovation, constant reoccurring stuff, the ‘simple’ domain applies and best practice pushes down on efficiencies and effectiveness, on being consistent with standard processes and clear structures. Always be conscious of the limitations within best practice.

For a more distinctive innovation you tend to move more towards the complicated domain, where experts ‘kick-in’ to help and offer plausible outcomes based on known experiences. You need to listen to conflicting advice and watch out for entrenched thinking so it can be challenged.

quote-this-type-of-innovationIf you are pushing for more radical innovation then it has a higher complexity and risk and falls into the complex domain. The range of options sometimes seems infinite where we explore more through the lens of perspectives and judgement. The outcomes are never easy to predict upfront and you need to keep looking for patterns to emerge and ‘inform’ your decisions. The use of experimentation, gamification, allowing greater interactions and a place you encourage dissent and finally be patient and allow time for reflection. This type of innovation can change the game.

Then we have the chaotic domain, where disruptive innovation tends to sit. You lack any clear ‘cause and effect’ as it is entering more of the unknowns. The key is deciding to act, not from knowing the practice but recognizing it is novel, as you search for what will work, attempt to take back control and provide clear and direct interventions to firstly stabilize, understand and learn from and then further respond to bring it back into some order that allows you to participate.

The appropriate framework of practices and approach are really valuable

This framework offers a perspective that has enormous value as it offers managers a guide in placing different thoughts with different actions. The Cynefin framework offers a typology of contexts to help you sort out a variety of situations in which you might need to make different decisions and then provide what actions to take from the recognition.

The framework looks to place the appropriate actions and decisions into the right context. The framework emerged from complexity theory and innovation falls into this.

I would suggest focusing and developing your own practices is so much better that attempting to ‘adopt’ others best practices.

When you next think of best practice as your answer, come back and reflect on this first, to place the appropriate innovation into the right practice that meets your needs, not someone else’s.

Publishing note:  This blog post was originally written on behalf of Hype and with their permission I have republished it on my own site. I recommend you should visit the Hype blog site where they have a range of contributors writing about a wide-ranging mix of ideas and thoughts around innovation, its well worth the visit.

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Redesigning the organizations middle for a new innovation shape.

managers-choice

Let’s admit it; our middle management needs a radical makeover, a new fitness regime to make us far more ‘innovation fit’.

Most organizations do need to change their middle management structures as they are far from that necessary ‘fitness for 21st century purpose’ in a constantly changing, challenging, more open innovating world.

The general argument goes and I relate to this, that the middle manager is so pressured to focus on the delivery of short-term results that all their efforts are centered far more on delivering ‘just’ an effective organization.

An organization that focuses on driving out any excess or leeway, reduce the variations, constantly dampening down potential risk and uncertainty. Today much of this being ‘efficient and effective’ is in direct conflict with what innovation requires. A space for ‘cutting’ some slack, seeking differences, exploring what variances can provide, encouraging a certain risk and uncertainty to allow for fresh thinking to emerge that leads to better things within the organization.

Yet the middle managers obsession with constantly chasing efficiencies alone, there is little ‘slack’ for innovation and new learning. Their measurement is often based on this efficiency and effectiveness emphasis and not on generating innovation.

Resources are often in conflict when it comes to innovation

Middle managers are being stretched as much or even more than the majority. They fight to keep their people, argue endlessly about what and how they can manage the constant flow of change that is coming from all directions.  They are pressured for time, to think, to fully engage and these mounting pressures are simply squashing out the opportunity to explore, it is actually squeezing the middle managers ability to build a more flexible, responsive organization. Innovation is in direct ‘tension’ with much that is being undertaken at middle management level.

quote-missing-radical-changeThis does result in sacrificing ‘creative time’ by working purposefully towards a well-tuned and efficient operating system, where it seems innovation is not capable to move from a collection of ad hoc activities into one that builds progressively that more sustaining innovation structure, establishing a deepening set of capabilities that this requires. We are missing the radical change in designing our middle within organizations when it comes to innovation becoming more our core.

The conflict of sustaining performance and allowing freedom to be creative

Although organizations claim to be innovative, often the very people that we are expecting to manage the ‘dynamics of innovation’ within organizations, the Middle Managers, are seeking the very opposite, doing everything possible to keep the environment as stable and consistent as it can be.

They are taking away the ‘vital essences’ that innovation needs – a fluid, agile, open, diverse and flexible environment and putting consistent constraints and barriers in the way in their pursuit of efficiency and predictable effectiveness. It often can’t be helped; they are expected to keep the system as effective and efficient as possible to sustain performance.

How can we move the needle and tilt it more towards innovation becoming more central without inflicting a more radical overhaul, one that is unlikely to happen in most existing organizations.

Let’s turn the existing core competencies needed for middle managers on their head and offer a new mix of primary, critical and core capabilities that are the measuring point for the MM’s new core competency set that provides for a clearer innovation focus as essential to master.

Let’s flip the thinking and set new requirements

We all recognize that the dedicated middle manager holds the organization together. They are often the glue that connects the organization with the leadership and enable the ‘forces’ to flow, yet do they allow this for innovation?  In traditional Chinese culture qì (also chi or ch’i) is an active principle forming part of any living thing. Qi is frequently translated as “life energy”, “life force”, or the energy flow “and innovation is the same vital need within organizations.

The problem we often have to face todays is to resolve that the middle manager is tending to block the creative flows. The layers below and the layers above are disconnected and it is this essential middle that needs to allow this dynamic flow up and down organizations, to allow innovation to become more aligned and consistently being in-tune with its needs, as seen by the top of the organization.

Changing the focus can provide a different mentality and energy force

Flipping the thinking on capabilities around for the Middle Manager

Flipping the thinking on capabilities around for the Middle Manager

Flipping the thinking on capabilities around for the Middle Manager

  • Primary becomes the base not the pinnacle. What they do in efficiency and effectiveness remains as their primary capability – you don’t alter this, it is too engrained. This can only change over time and through their inner awareness and recognition that innovation needs to be embedded, alongside the existing ‘fixation’ on efficiency and effectiveness. Don’t try to radically change, make progressive step changes. Efficiency and effectiveness clearly remains the inventory repertoire of solid capabilities so as you set about to build a new platform, based on innovation, it layers and interlocks
  • You target selected critical capabilities to learn and explore. You provide the MM new clarity of the emerging critical capabilities they need to build up for innovation to become more sustaining, more in-built core. These are the capabilities that will provide the greatest impact for sustaining competitive advantage, not internal in focus but external in all its orientation to become closer to the real customer’s needs.
  • At the top of the pyramid is the core capabilities they need to possess. This cluster of capabilities is centred on the critical capabilities to make innovation main stream, to become a daily part of their thinking, their make-up, their intent to ensure innovation happens and flows throughout the organization. These differ according to the role, area of focus and contribution but are ones connected to innovation – design thinking, networking, motivating creative activity, encouraging experimentation, offering a more safe-to-fail environment, seeking better and more rewarding outputs and outcomes from the activity generated.

The middle manager carries through connection and identification as facilitators

Middle managers tasks should increasingly become more about performing the role of connectors and facilitators, not the guardians and gatekeepers for the decision makers. Their work should include the encouragement that everyone is engaged in innovation work.

Making sure everyone has a ‘sight-line’ and identification into their contribution for any organizational innovation framework so they stay well-connected and engaged. The art of communicating and looking to build new relationships constantly becomes the key.

We need to find that new high ground for middle managers to be seen as the real connectors and enablers and not the current view as more often than not the blockers on innovation in gaining access to the knowledge to help us do a better job.

We all need to all think about flipping our thinking of what is needed in the middle of our organizations and it does need to recognize the middle manager’s position, one that is more under threat than ever, needs fresh thinking, it needs new core capabilities.

Publishing note:  This blog post was originally written on behalf of Hype and with their permission I have republished it on my own site. I recommend you should visit the Hype blog site where they have a range of contributors writing about a wide-ranging mix of ideas and thoughts around innovation, its well worth the visit.

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Risk: Understanding Your Scope of Reach from Your Grasp.

Mans reach and grasp.We were not born as risk-takers but we can develop it through our own growing self-actualization, creativity, a pursuit for growth and enjoying that feeling of being stretched.

Well some of us do, but sadly most tend to become risk-avoiding because of the environment they are in or been associated with for long periods, where avoidance rubs off, it seeps into the soul.

Many enjoy being simply ‘passive’, avoiding anything that smacks of being ‘proactive’; it is safer to be ‘reactive’. Innovation and heaven can equally wait.

Putting it simply most people and organizations are just afraid to take risks and this fear takes over and drives their choices. Innovation is certainly something that suffers from this fear of risk. Organizations miss critical opportunities, individuals fail to speak out and argue for a given change or innovative idea. We can simply stop growing, to want to become something more, we take the easy option, we avoid risk.

Reducing innovation to the lowest common denominator.

How often have you felt all the risk-mitigation has been taken out of the innovation concept you have been working upon, for it to emerge as a pale reflection of the original idea? Often I can hear.

We need to be reminded that innovation is the act (risk taking) of introducing something new (creativity) that adds potential value. By reducing the risk we often do not produce something better, just simply an alternative to what is already out there. Minimise the risk, strive for certainty, avoid the awkward questions, just keep the head down and toe the line.

Our organizations talk about the need for risk but don’t walk the risk path.

If you dont tryThe understanding of risk will always have associated with some fear, discomfort and resistance and that can be an uncomfortable place to go. The whole ‘act’ of letting go is never easy. It is the ability to manage risk that reduces its fear. It is through experimentation we gain our best learning, we actually are forward learning as we are accelerating our knowledge.

Surely the more we attempt something different, proving or disproving it makes for exciting work, we become motivated, curious and wanting more, providing there is the encouraging environment to experiment and explore.

As I have suggested before “shaping ideas, taking risks, allowing experimentation, providing tolerance (of failure or debate), exploring the unknowns, all should be an integral part of innovation”.

Innovation is risk-taking so let’s embrace it, not just for the sake of taking risks where you can become addicted to the thrill but in constantly seeing the positive payoff within the risk, it needs being appropriate and set against the ‘given’ situation and the learning in potential loss but recognizing the potential in gain.

The search is for meaningful contributions

NegativityThere is so much negativity swirling around our organizations, a real detachment that is raising alarm bells. Today’s workers are “neither empowered nor inspired to navigate the challenges faced by twenty-first-century organizations” according to a recent Deloitte report and commented upon here by Steve Denning . As Steve observes in this article, as a result, creative, passionate workers simply don’t want to work in organizations with “clearly defined roles, organizational silos, and predictability”.

We are also in real need of better “inner working lives” and we need to look for ways to allow our people to become engaged, feeling part of something that allows for being more creative and passionate. An environment offering somewhere that is seen as more productive, looking to build for future contribution and finding ways to be more collegial, working in teams on these experiments and explorations to learn and advance the innovation thinking. It allows us to grow from within.

We need to find ways for higher levels of risk-tolerance. We push the ordinary back into the extraordinary and all of us what to be associated with those sort of moments, those events that give meaning, purpose and pride into what we do. We need to allow risk in, so risk can come and live with you.

Our leaders need to lead and guide.

Learn and LeadWhen one hears that the leadership is in disagreement it tends to stop organizations from being adventurous until that issue or sticking point is resolved.

When it comes to innovation we do need to look to our management to manage option proliferation, resolve criteria disagreements, overcome stalled decisions, clarify rejections or discounting new ideas before they are ‘fully’ formed

Those leaders assigned to lead innovation need to become more engaged, stop the limited participation and take the time innovation does require. Head nodding or ‘just’ talking innovation just does not cut it!

Commitment does matter, enormously, up and down the organization.

We need to recognize allowing risk is becoming the basis for a commitment to change
Wanting innovation requires the need to encourage the management of risk. Today we are in markets with slower growth, higher volatility and potential for disruption. Risk needs to be proactive not reactive.

Equally the sentiment that we cannot disrupt our core needs some shifting in thinking as others are busy working on ways to do that to you at this very minute. Risk comes from not knowing.

We need to manage the ‘certainty of return’ by making the knowledge that comes from incremental steps of experiment to validate an idea into a new innovation needs this consistently improving the business case. That comes from steady ‘readiness-based decisions that prototypes or pilots put into the hands of the consumer or customer to explore around, will advance our knowledge, each time of the potential value and ‘seen’ worth of this concept over the existing ones in the market place.

Shifting our thinking can be gradual in learning

Take a riskThe effectiveness of risk assessments, capturing more and more external market data and attempting group prioritization certainly helps but in volatile markets this is not enough.

We need to develop those risk-mitigation steps to constantly increase confidence; we need to look more internally or with our partners at our capabilities to measure the controllable factors and events to keep innovation on track and we need to seek out individual stakeholder discussions to manage their unique concerns. This is far more a shift to execution than relying on market attractiveness conditions alone.

Thinking risk in those different and manageable ways to move forward and grow

We need to mitigate uncertainty by constantly reiterating known and unknown risks through these constant engagements in experimentation, prototyping, piloting concepts through. This needs to be in a more dynamic ‘management of the portfolio’ concept, from concept to commercialization process.

A place where risk-mitigation needs to be in-built all the way, to build knowledge as it ‘reveals’ itself. In innovation, mostly completely new to the world it is never apparent, you have to ‘tease ‘ it out on its value and contribution. Everything simply cannot be available when you often just don’t know, you take small steps often to feel your way and build that knowledge up.

We need to understand our reach and ability to grasp

Reaching and graspingThe ability to push on and find out, to stretch, to understand our reach and our grasp, does need some risk taking but in thoughtful, measured steps. Good innovation needs measured risk-taking and let’s learn the ways to allow our innovating to happen and get our passion and engagement back, flowing through the veins of our organizations.

We need a mantra of ‘build-test-feedback-revise’ iterations performing constant steps and learning to gather information to reduce uncertainty. One that is far more agile, vibrant, dynamic, flexible that applies a more leaner, faster and more adaptive and risk-based approach. The risk-contingency is about constant steps and learning to gather information to reduce uncertainty.

We need to move forward with a degree of certainty but also perhaps a little fear.

How about this as an idea to explore?

Shifting perspectivesHow about approving some pilot projects and providing resources to have unfettered six-month periods with no rules and no reviews but at the end of this agreed period ‘something’ has to be seen and tested by a customer.Then you embed the learning and further scale

It encourages risk but in clear time frames and with a definitive result that advances knowledge and takes you closer to its future value.

You look and encourage new perspectives. Is this that risky or is it perhaps allowing risk to be managed in new ways of learning?

We do need to rethink the management of risk for innovation.

New business growth is very different from business as usual but in all honesty, is there that much business as usual still around? We do need to loosen up our thinking on risk when it comes to innovation, otherwise our growth will remain limited, stuck in the fear of the unknowns?

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Exploring the Value Of Your Innovation Capital

Innovation Capital

 

 

 

Following on from my last post of “Place your future bets- invest in Innovation Capital” which outlined the significant contribution innovation capital plays in our economic growth, let me offer some further thoughts on its value to really capture and understand, so we can measure it within our organizations.

We have the three components; of physical capital, knowledge capital and human capital that are the innovation-related assets, these make-up Innovation Capital.

I have been arguing that innovation capital draws from the core of intellectual capital and its suggested (and broadly recognized) components of human, structural and relational capitals or social capital. I have previously discussed this converging up, as the ‘nesting effect’

Innovation capital needs assessing and measuring so we can understand the relationship between this innovation capitals (and its present and future potential) and organization performance. We need to know the innovation capital ‘stock’.

Why, well ‘stock’ can be ‘static’ and we need to make this more ‘dynamic’ so innovation can ‘flow’ from this constant renewing of our capitals and be transformed into new value.

Let me explain the innovation capital stock in (my) five parts

• It is a bundle of the firm’s resources and assets that renders complementary services in the process of new knowledge (innovation) creation and commercialization
• Innovation capital as renewal capabilities of our organizations in the form of producing intellectual properties that offer value and extracting from our intangible assets
• Innovation capital possesses attributes that make it a ‘strategic’ asset with the key lies in specifying the nature and application of these assets in relation to the new knowledge ‘flowing’ into the organization, for generating and commercializing concepts and ideas, into new forms of innovation
• The innovation capital is made up of the ‘dynamic interactions’ between the intangibles employed and ongoing development of these intangible assets.
• It is the ‘effective use’ of all the different kinds of intangibles that contribute the activity into innovation capital.

For me it is these tangible and many intangible assets that fire innovation, they make innovation combustible, to ‘spark’ new value creation.

Innovation will continue to struggle if we don’t understand its capital make-up.

Intellectual CapitalIf we don’t understand where the innovation value resides, we will certainly struggle to continue to build innovation’s position in the organization. Today innovation is still regarded as ‘expendable’, sacrificed on the altar of short-termism.

This creates a growing uncertainty, often reducing innovation down as that no real ‘sense of urgency’ and becomes ‘contained’ in discrete projects, failing to offer that real, substantial, ongoing value for the enterprise.

We simply don’t ‘unlock’ the real value of innovation. If we lack the understanding and abilities to build this sustaining operational capacity for innovation we have ongoing problems.

There is the need as its longer term goal, to be simply fully embedded inside the organization that it ‘resides’ and simply becomes indistinguishable, it becomes the operating core, constantly aligned to the strategic needs and goals. Innovation’s benefits must be outstanding and well understood.

Innovation will remain tentative, always stuttering along, lacking this absolutely organization innovation rhythm if it is not fully understood in where it generates it capital from and what new capital and stock it provides.

Actually most of our innovation capital is learning capital.

grow through learningThe more we strengthen our knowledge and value our people, the more we can generate new knowledge, build greater narratives, deepen discussions, make better connections and build our interactions out across growing communities.

The more we discover, the more knowledge we gain does leads up to determine a potentially better decision-making and value creating potential.

This should, in theory, give greater confidence, both internally and externally, that our invested financial capital is in ‘good hands’.

The power lies in the linkages we can forge, in acquisition, in assimilation and then into eventual transformation, that allows known knowledge to become new wealth-generating innovation.

Our learning capital needs to emerge and dominate future discussions in improving its quality and value contribution. We need to increase incentives for organizations and their people to learn new things or update their existing knowledge.

We need to learn how to articulate knowledge in its acquisition, assimilation and transformation and that comes back to understanding absorptive capacity.

Managing organizational learning and innovation, more ICT is needed.

ICT InfrastructureTo successfully manage innovation capital and understand the make-up of the intellectual assets, the new main role of ICT is pulling together Web 2.0/3.0, collaborative technologies, social networking tools, wikis, internal blogging and knowledge capture, so as to help people share this growing body of knowledge through common platforms and electronic storage.

As our social networks expand they become the vital source for intellectual capital and innovation understanding. These relationships and networks need to be fostered, constantly measured in their value and contribution, structured in ways to communicate and interpret outcomes for ‘directing’ future value creation.

The whole promising ‘wave’ of collective intelligence, social networking and building real useful communities of knowledge is a real challenge today to pull together. It is becoming a crucial factor and investing in the physical capital this needs, does allow for people to share knowledge through common platforms and strengthen the knowledge, with the human capital that innovation requires, to drive real growth.

For instance, EU investments in ICT’s are due to increase by about 25% under Horizon 2020 compared to FP7. This EU investment will support the whole chain from basic research to innovation that can deliver new business breakthroughs, often on the basis of emerging technologies.

We also need to recognize the work-to-be-done, not work already done!

Work to be done is the need for our future growth and well-being to be derived through innovation activities. These so much made up of intangible parts will provide the new wealth of organizations in the knowledge sharing economy of today and the near future.

We need new forms of evaluation to measure the real asset wealth of the organization to understand the points of intensity, their connected dynamics and what is required to reconfigure the changing capabilities and capacities needed to grow in the future. There is a lot of work to be done out there.

Shifting our investments into today’s more valued capital- Innovation

It is how much we are able to adapt to fast moving changes will determine our success. It is the combination of all the sum of our capitals and knowing what factors and assets contribute into making our innovation capital will determine the ‘health’ of our future.

I think it is essential going forward that we need to significantly increase our innovation capital focus, so it can be fully unlocked, so as to release the true dynamics within the system and structures of our organizations to realize innovation’s potential.

For me, Innovation Capital and its make-up is where we need to focus, to understand and invest into. It drives our ability to create and sustain value creation.

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Place Your Future Bets – Invest In Innovation Capital

Value of Innovation CapitalRecognizing the value of our innovation-related assets is where the ‘smart money’ should go. To gain growth and to improve productivity is through innovation. We need to translate knowledge into new values.

When you pause and consider the make-up of Innovation Capital you realize it makes such an economic contribution and  in a report from McKinsey & Co, they have set about identifying this to produce the above summary, covering 16 countries, to understand the real value of this Innovation Capital.

These numbers are big and still don’t fully capture everything associated with innovation as much remains ‘hidden’ or ‘attached’ to other activities as well.

We need to shift our thinking on what makes up Innovation Capital

The shift taking place in recognizing that our capital is well beyond ‘just’ financial is rapidly altering organization investment decisions. The McKinsey approach has set about capturing a broader understanding about innovation than R&D alone.

Innovation and its value creation goes well beyond just R&D, it is made up of a broad range of intangible assets that are firm-specific and due to this, they are being recognized as hard to replicate, providing the growing edge over competitors if they are identified and invested in correctly.

In this report they considered the broader aspects of Innovation Capital capturing software, design, market research, training and new business processes as well as spending by governments and through tertiary education in science, technology, engineering and mathematics (STEM) subjects.

The value of this inclusive approach

By taking this inclusive approach to innovation spending they were suggesting allowed them to document better the investments underlying innovation, to see the greater “innovation infrastructure”

We are clearly seeing the continued increase in the valuations given to certain organizations, up to 80% of the value is coming from the intangibles, with the vast majority of our business organizations are really slow in getting to grips with identifying what is making up this value in their premium.

The urgency for us all, each organization, is to identify the investments and the returns as the innovation impact offered by McKinsey’s report is delivering a significant business case for understanding and recognizing the strategic importance of identifying and developing all your innovation capital.

Just go back and re-look at the graphic above for investing in Innovation Capital for its impact and implications for each of us.

Recognizing Innovation Capital is really important

So the make-up of innovation capital is big, I mean really big, this might help generate a greater innovation wake-up call. In a report from McKinsey and Co, called “Innovation matters: Reviving the growth engine” and first presented at the G8 leaders Innovation Conference, in London on 14 June 2013. This report quantifies the importance of innovation in driving productivity growth and sets out the actions that governments and societies can take to build “Innovation Capital.”

The paper offered is stimulating the need for building the “innovation infrastructure” for our growth and as a key capability for our organizations and countries.

Where to start in specifically identifying Innovation Capital?

Within the McKinsey report they break down Innovation Capital into three components. These are:

Physical Capital is formed by investments in information and communication equipment (ICT) and across the countries analysed it represents 16 per cent of the Innovation Capital.

Knowledge Capital is formed by investments that build firms’ intellectual property and brand equity, including investments in computerized information, R&D and marketing investments, as well as relevant research in universities. It represents 60 per cent of Innovation Capital across the countries McKinsey analyzed.

Human Capital is formed by investments in building individual or organizational skills that drive productivity growth. This includes public and private investments in tertiary STEM education, employee-based training programmes and investments to develop organizational efficiencies (e.g., redesign of business processes or review of business models more broadly). Across countries analysed it represents 24 per cent of Innovation Capital.

It is important to recognize that McKinsey has captured and measured these to produce the impressive impact that innovation capital has. Is your organization identifying these for assessing their innovation capital? Most probably not.

Finding our innovation uniqueness

The make-up of our Innovation Capital are unique to each organization and highly valuable, I’d argue the report by McKinsey on its contribution is still significantly understated but a terrific step forward in attempting to quantify it.

It is the pivotal role of people as innovation carriers – their networks, collaborations, knowledge flows, interactions and tacit knowledge – and how innovation itself is a potent competitive force that drives productivity. All this is often ‘hidden in plain sight’ as our people are innovation’s active ingredient, the catalyst that turns novelty into real benefits.

Innovation capital is the big win if we can harness it well.

 

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Recognizing your type of innovation leader

Two personalities 1

Often innovation succeeds or fails by the personal involvement and engagement of a ‘selected’ few- they make it happen as they are the heavyweights that have the final say.

We all need to recognize the type of innovation leadership personality within our organization, the ones we are working for, as this might help you manage the innovation work a whole lot better and attract in the resources you need.

So can you recognize the traits of your innovation leader?

Are they a front-end or back-end innovation leader? Here’s how you can begin to spot the difference.

The thinking about this came from this book.

A book recently published “Innovation Governance- how top management organizes and mobilizes for innovation”, written by Jean-Philippe Deschamps and Beebe Nelson is one I can totally recommend it as it is so rich in thinking around managing innovation.

The authors view argues that organizations are traditionally tribal and often each group possesses its own rules, its own judgement of what is important and this ‘creates’ the absolute need to have a mechanism or strong personalities that can ‘cut’ across these potential barriers.

One suggestion coming from this book is recognizing your innovation leaders

According to the authors of “Innovation Governance”, you need the right combination of front-end and back-end leaders, since the two types are complementary. They are able to lead and manage these tribes.

The best way to identify these two types of leaders is often their functional orientation, possible background disciplines and their general management interest and attitudes.

A good example of this ‘divide’ is between Steve Jobs and Tim Cook of Apple, as highly visible and well cited in personality, backgrounds and interests, in what we read. As described well within the book this difference is best illustrated by this Apple leadership comparison.

The front-end leader

Steve Jobs 1Steve Jobs was clearly a front-end leader. He constantly sought out a more radical creativity in design and end product result.

  • He had a real passion for new ideas, exploring and combining different thinking and designs, searching for solutions to customers un-articulated needs to improve their product experience.
  • He was constantly questioning the status quo and challenging (extremely hard) and confronting the team around him with constant how, what if, what else and why not type of questions.
  • He had a more entrepreneurial flair and more of a venture capital mentality regarding returns and risks; he kept focusing on ‘big win’ promises, instinct often drove him.
  • He had this belief to constantly experiment, to open up new paths and different thinking and he looked to accept risk and tolerate failure by moving through the ‘dwelling stage’ into the ‘learning from’ set of insights.
  • He encouraged individuals to have a degree of freedom, he challenged them constantly, and he expected a climate of mental adventure and excitement to attract others into the organization but these were made up of a diversity of backgrounds. Yet he was, by all accounts a control freak. Nothing passed without his agreement
  • His own background was rich in diversity and inquiry and he draw often from this and he portrayed himself as a rebel
  • He held onto his vision, yet was prepared to adjust the pathway towards one that responded to meet breaking opportunities.
  • Finally his tolerance levels were often ‘explosive’ but he generated the level of commitment to produce some of the stand out products of recent years.

The back-end innovation leader

Tim Cook 2It is often questioned on why Tim Cook took over when Steve Jobs died. He is seemingly the archetypal back-end guy. He was credited with managing the Apple supply chain, manufacturing and logistics, thus freeing up Jobs to focus on his front end pursuits. Tim Cook comes with more of an operational discipline.

  • He focuses on getting products to market flawlessly in cost-effective ways, mastering all the complexity of putting in place the operational foundations necessary to go from concept to launch and roll-out.
  • He has that insistence on achieving higher planning quality and expects the process discipline and standardization to make innovation replicable.
  • He understands the demand for speed to market through a high level of cross-functional integration and a ‘first-time right’ philosophy in implementation.
  • Would have without doubt flexibility in execution decisions, based on detailed operational knowledge and pragmatic risk management.
  • That ability to motivate staff for product battles and promotion of ‘launch and learn’ approach, leading to adapting quickly to improvements, re-launch cycles and even recalls.
  • Tim seems to ‘think’ strategically, considers the investment community, amassing cash and systematically picking off areas that maintain Apple’s present higher end approach.
  • He seems to continue to encourage higher value incremental steps, holding on to accepted Apple philosophies and perhaps struggles to ‘go’ for the bold new breakthroughs.
  • Tim strikes me as more ‘grounded’, providing for greater stability and managing a maturing organization.

Both Steve Jobs and Tim Cook have strong leadership skills, they both have ‘got’ innovation but their approaches and acceptance levels would have been coming from their different approaches, personalities and backgrounds. They both got detail.

Strong leaders with distinct personalities need understanding. Otherwise you are often forced back to the ‘drawing board’ for deeper reasons than you initially consider. Consider the personality and what ‘makes-up’ their set of experiences and risk profiles to help ‘advance’ your innovation thinking

Balancing the respective innovation clout always needed.

If you have a front-end leader at the helm of your innovation activities then you need to find the balance of who manages the disciplined operational side, then if you have a back-end leader, who will defend an aggressive front-end agenda?

The appointing of any innovation leader has significant implications, sometimes huge.

This ‘style’ can determine what generates innovation and can determine the passion, commitment and the emphasis points that your organizations innovation will possibly give preference too, and then provide those necessary resources you are needing.

It is well worth understanding where your innovation leaders  personality, background and functional orientation might lie. It might make your task a little easier to attract the funds and resources you need. So much of our innovation concepts die within the organization, often sadly, as they lack sponsorship appeal and simply does not get them excited.

So by appealing to their basic instincts of their personality traits you can perhaps ‘hook them’ into your innovation concept. Once you have their attention you can then ‘open it up’ for why it makes sense to explore further for taking it out into the big wide world.

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Building upon four key wealth creating pillars

Wealth creation 1Most rooms we enter have four sides; they provide the structure to build upon. Presently in many of our economies, particularly in the West, we are struggling to find real growth; we are limited on our wealth-creating possibilities. Why is that? Our structures seem to be weak not strong.

We are certainly relying far too much on ‘selected’ pockets of economic activity to keep us going. Technology is clearly one of these. Yet our longer term forces for sustaining growth remain ‘fragile’, our structures remain wickedly  ‘out of kilter’ and we need to find stronger connecting frameworks that reinforce each other, so we can build further upon these to manage our business activities in new ways.

In most of our economic activities technology is playing a significant part in altering our habits, routines and thinking but it alone, is not enough. For technology to really give benefit it needs to be driven by our ability to generate wealth creating activity and that comes from integrating knowledge, gaining experience and being able to articulate this in better ways.

To achieve this, our business structures that we have in the past relied upon are in need of changing. They need different pillars to build upon.

Welcome to my four pillar room……..with a view

One such room I see has four pillars; firstly a value creation one, then one that prompts a change in our thinking around the value and creation of constantly evolving business models, a third one based on understanding our intellectual capital base, where our knowledge resides and can be harnessed, and then the final pillar of the innovation capital that can be generated from this to create wealth generating opportunities.

Why are these four pillars important as our structure within our ‘wealth-creating’ room?

Pillar one – For me we lack the ability to articulate the value creation narrative.

We need always the wealth generating perspective to get behind. We want to feel this is ‘dynamic’ and can offer all those involved that feeling of identification, so we can find individual ways to apply them, where there are the combining and transforming possibilities for us to, investigate, explore and exploit. We are searching to manifest fresh, new outcomes to create new wealth creating potential.

To have the ability to articulate the value, what potentials can make up the possibilities to develop and deliver the future promise? Developing a good value creation narrative is essential, it requires critical components and for us all to identify through a common language.

Value creation and its potential can be created through the Business Model. It is identifying the inputs from the different capitals and the ways we can transform these through business activities and interactions. Our ability to articulate where the value creation potential lies requires our ‘narrative’ to be broken down, often called the value proposition.

Pillar two – The Business model is becoming even more critical today

The whole movement towards creating the business model through a canvas approach allows us to articulate our ‘potential’ value generating story. As we learn to work with all the components that make up a business model we are responding, capturing, creating and delivering a constant flow of new value generating opportunities.

The more we can express ourselves through narratives and the emerging business model canvas we are offering disclosures, we are setting in train discussions so others can contribute and add to these emerging business model concepts.

To sketch out our business model canvas, we do need to constantly work the BM canvas for the integrated design. What we must try to develop within our narrative and canvas is the underlying dynamics that capture the process of change and why this combination provides the value creation.

Underlying any Business Model is knowledge, experiences and insight. These come from combing all our capitals and the ones often described under our ‘intellectual capital assets’ become essential.

Pillar three – Re-framing the debate around our intellectual capital assets

It seems today our business environment is highly diverse, far more dynamic and subject to rapid change. We need to constantly survey the landscape to adapt and adjust, acquiring what is needed. The increasing value is to know all the potentials within the ‘interactions’ of the parts and how to renew and recombine them on a constant basis.

Often intellectual capital is grouped into three or sometimes more categories. The capitals commonly used to describe ICA are human, structural and relationship capitals. In summary:

a) human capital have at its core the competences we build, our intellectual agility and attitudes to form potential synergies for new value creation. Our outcomes are governed by our motivations to want to produce fresh knowledge creation or simply absorb what is ‘out’ there.

b) The structural capital provides ‘the skeleton and glue’ of the organization in its philosophies, processes, routines, infrastructures, culture etc., for permitting and building knowledge. It builds the mechanisms and architecture.

c) Our relationship capital, is our third ICA, which represents our abilities to make connections, to network so as to absorb, exploit and explore new knowledge, it is this new understanding that feeds and influences organizations life, to renew, to rejuvenate, and to offer longevity.

We need to move beyond often just that academic debate around intellectual capital and their asset value, moving well beyond simply infer the value of our intellectual capital, we need to really understand its make-up. It is the interactions of these intellectual capitals that is becoming essential to understand, they make up our innovation capital. Knowledge alone has limited value, it is the knowing how to apply it through innovation that will offer us the potential for wealth generation.

Pillar four – Innovation capital is the essential strategic asset to strive for.

Innovation is made up of a collection of ‘stock’ and our abilities to allow this stock to ‘flow’. We mostly acknowledge and recognize innovation is essential for business growth and our future wealth generation potential. Innovation is for me a real wealth generating capital, it is future orientated; it needs consistent learning, experimentation, exploration and reconfiguring. The innovation capital is the ‘core sum’ of the abilities we can combine from our intellectual capitals.

I believe we need a new innovation capital valuation model. It needs to capture the dynamic interactions of our capitals contributing and ‘render’ these into different productive outcomes. This model needs to find and then separate the ‘dynamic’ from the ‘static’ innovation capabilities, the ones that offer new potential not ones simply repeating the process.

To achieve this we need to unbundle resources, assets, renewables, competencies and capabilities and describe these outcomes in , in my view, a fitness landscape that provides a visual of what you have, what you might need and highlight where the critical gaps lie.

We are needing to understand how our organizations can integrate, reconfigure, renew and recreate its resources and capabilities to build different value creation propositions and business models.

Recognizing the combining effect of the four pillars

For me, it is recognizing the ‘combining effects’ of these four pillars; of value creation (vc), business models (bm), intellectual capital assets (ica) and innovation capital (ic). It is the dynamics within the multiple combinations that will generate the future wealth creation we need.

We are in need of having a better understanding of the integrated value focal points of these four pillars combining, they need connecting so we can build the supporting structures and place the roof of need, our wealth creating one, to give us a new potential of harnessing our innate abilities to be creative. These four pillars offer perhaps a new core, a new transforming power, they make our activities connected and dynamic.

Unlocking all our potential is the job needing to be delivered upon

Our job today is to unlock the potentials from knowledge, harnessing our capitals to focus more on releasing our resources to work on their dynamic capabilities that combine vc + bm + ica + ic to make this a ‘room’ that gives us the potential to reside and generate new wealth potential.

A transforming one, where the make-up of value creation, articulated through business model designs by knowing the capitals that ‘feed into’ and build our stocks and flows for new innovation that does have the greater potential for wealth creation to occur.

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