Breaking out of the current economic dilemma needs radical innovation

I gaze through unbelieving eyes at the continued rise of unemployed in Europe. Unemployment in the Eurozone has reached another record high with the seasonally-adjusted rate for April  2013 going to 12.2%, up from 12.1% the month before according to the European Commission’s statistics office, Eurostat:Eurozone Unemployment May 2013 EurostatAn extra 95,000 people were out of work in the 17 countries that use the Euro, taking the total to 19.38 million. Both Greece and Spain have jobless rates above 25%. The lowest unemployment rate is in Austria at 4.9%.

It seems never-ending.

Youth unemployment remains a particular concern; you simply have to wonder what we are storing up in the longer term with this situation. Can the youth ever catch up, can our society as it is positioned give them the opportunities to turn today’s grim world into a world of optimism and contentment, or is it a lost generation?  In April, 3.6 million people under the age of 25 were out of work in the Eurozone, which translated to an unemployment rate of 24.4%.

Why does this issue of growing unemployment seem to be drowned out by events that seem important on the day but realistically pale in their significance against something as damaging as this present crisis?

Examples of persistent economic and social challenges

We are facing significant society challenges. These include declining Economic competitiveness, deepening Social inequalities, rising Mental ill-health, increasing Crime and social disorder and we see growing Alcohol and drug abuse, to name some of the issues being increasingly tackled as part of the consequences of these tough economic and social times.

We must increasingly recognise that the cost of deferring concerted action to confront these growing set of social challenges is beginning to rise – and could easily outpace our ability to respond.

Can we afford to wait? There are so many pressing questions.

The cost of lock in

More fundamentally, our existing approaches and institutions are also inadequate because, in the main, they lack the capacity to develop the new approaches we need through innovation.

We are faced increasingly with the ‘innovator’s dilemma’, identified by Professor Clayton Christensen, where a company or in this case whole nations can’t seem to address the changes (rapidly) going on around them.

Their existing models become obstacles in the face of changing conditions, deepening issues, new threats from emerging nations, rapidly changing technologies and a growing inability to overcome rapidly changing circumstances wrought by deteriorating economics, (infra) structures and upheavals.

Any organisation or system or even nation is susceptible to ‘lock-in’, whereby it loses the ability to develop novel ways to serve its customers or clients or markets because it has invested so heavily in its existing processes and technologies. This is part of one of the fiercest debates on the future of the European Union we have yet to have.

Our understanding of innovation has broadened

Today innovation is increasingly being understood in a broader perspective than just products alone. We are in a period of major transformation in what we mean by ‘innovation’. We need to push innovation across its broader understanding to explore new business models, unique services, greater collaborative techniques and community engagement.

Traditional innovation is insufficient for the challenges we face, this will not resolve climate change, an ageing society or reinvent public/ private services that match demand and need. We need greater connections across society.

There is a growing buzz around the Quadruple Helix of Innovation, where Government, Institutions (Academia, Foundations and NGO’s),  Industry and Citizens need to collaborate together to drive structural changes far beyond the scope of one organizations and what it can achieve on its own. These will be increasingly through innovation engagement platforms where people use the designed structures to purposefully intensify exchanges to co-create value to solve our growing bigger problems.

Seeking out unconventional solutions through more radical innovation

These are times when we need some visionary leadership and thinkers out there. Those that dare to breach present accepted boundaries of rigid beliefs and conventions. Those that push beyond the normal practices and can depart from the commonly held goals of establishment, by looking for non-conventional novel solutions that can draw in more of the disenfranchised, we are seeing today.

Facing New Challenges: Promoting active inclusion through social innovation

Social inclusion is a pre-requisite for the creation of a just and cohesive society in which each individual can fully participate and realise his or her potential. Active inclusion, as one strand of the broader social inclusion concept is looking to draw in and deal with inclusion into society of people furthest away from the labour market.

We need to make new markets full of engaged young people.

 There is clearly a latent demand building in our societies and we need to turn this into a more ‘effective’ demand, to forge the links between supply and demand that will generate new value and opportunity. For example, who can invest in effective supply by supporting promising projects and collecting evidence of what works that shows promise of broader societal impact?

Then who can we involve who can invest in effectively ramping this up. Perhaps focusing the different Foundations already set up can turn this latent demand into effective demand. This might mean shifting resources from other parts of the world, back into Europe to get the economic engine kick started again.

Applying innovation intensity to what we do.

We need to rapidly accelerate a rigorous experimentation mentality by focusing far more on major societal challenges that need addressing, before it is too late. Ones that can encourage and embraces local solutions needed and engagement within communities but the learning can be rapidly absorbed and the winning concepts can be scaled up to benefit more communities or areas of need and resolution.

Different type of economic statecraft are needed to position ourselves

How can we encourage and accelerate more of our companies to pro-actively integrate environmental and social impact into their business models? To put into place better measures of investment performance over the long-term that ties into greater social good?

There is also a real challenge today to lay out a different position for government. One that is more the facilitator, setting out the conditions for  the impact economy ecosystem and  supporting in ways that invest in the longer-term infrastructure and platforms that can scale the innovations and partnerships needed to achieve sustainable, long-term growth.

Government cannot ‘play’ in all three horizon investment areas, it does not have the capacity, experience, capital and resources. We need leaders who not just make tough decisions but set about putting in place the different conditions, incentives and clarification of who does what and why. The more the short-term crisis extends, the harder it becomes for Governments to participate in mid-term future innovation activities. They simply can’t easily.

A time and place where we are converging to make social innovation a critical element

We are in a current battle to address both short and long-term economic and growing social challenges. We are faced with growing unemployment still, especially here in Europe. The youth of today need to engage, otherwise we are in a great danger of losing a whole generation and that has such significant impact on or nearly everything we have in place today.

How are we going to draw upon the imagination and expertise of a broader set of innovators and tap into the entrepreneurs that are out there, to tackle some of these significant societal challenges?

Are we at the early stages of a new economic order with even more disruption?

Of course we might be in the beginning of a very different set of economic factors. We might actually be heading to a completely different type of economy that melds features which are very different from economies previously based on the production and consumption of commodities. Today we are already seeing blurred boundaries between production and consumption.

We need to think about repeated interactions, care and maintenance and not one-off consumption; and a strong role for values and missions that are far more inclusive for society and less focused on individuals; otherwise we end up with a divided society that clash in ways reminiscent of past revolutions where the majority finally rebel.

Are we facing even more instability in the coming years?

The present value equation in our societies is rapidly getting unstable; we need some fairly radical solutions to reverse the existing trends. I think the challenges will only get harder in the months ahead.

We do need to positively disrupt before we get more unexpected disruption occurring. Innovation needs to play an ever increasing part in this to explore alternatives and allow those lost from current economic activities to begin to participate and make a contribution where they see there is a future for them.

The Innovation Word within the World Economic Forum

I was reading through the World Economic Forum’s agenda for this year’s meeting in Davos, taking place between 23rd to 27thJanuary, 2013 and saw Innovation is back on the agenda, big time. The agenda is a collective ‘innovation tour de force’ to solve all of our current ills for our leaders to work through, to begin to find all the solutions necessary.

The three programme pillars of the 2013 session are in themselves a statement of where we are economically and socially and what we need to work though: “Leading through adversity”, “Restoring economic dynamism” and “Strengthening societal resilience”. The themes are all placing the emphasis on the building, improving, unleashing, rebuilding reinforcing, sustaining and establishing which tells us exactly where our present business and economic woes need to go to be on the economic up.

The rise of innovation

So let’s take a peek at the rise of “innovation” within the preliminary agenda available, it is actually used 47 times within the document but in very specific ways that take it beyond the buzzword into something that has substance.

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The seperation effect required for innovation

I have recently been in some different discussions about the merits and balances required to manage incremental and radical innovation. Partly this is in preparation for a workshop later this month but partly from a conversation I am having with a sizable, well respected organization, with its head office based here in Europe.

In the conversation within the organization we were discussing the breakdown in their treatment of incremental and radical and they suggested this was being managed within an “ambidextrous structure” yet I was not convinced. I have to point out this was only a part of a broader story on the difficulties of managing conflicting innovation demands that they were having. One key constraint in their thinking I feel was not having distinct units as they were trying to manage incremental and radical through the same process and that, for me, is a basic mistake.

I feel to truly claim an ambidextrous organization you have to be working towards the conceptual model offered by Reilly and Tushman on the “Ambidextrous Organization”

Reilly and Tushman’s argument was to truly flourish, not only do you need to maintain a variety of innovation efforts but  it does need more of a recognition of the full organization to manage these differently, not in isolation or selected parts of your organization. You need to consciously address the differences and build those into the twin process of managing incremental and radical. Let me offer my take on this.

Simultaneous the need is to manage the differences in Exploration & Exploitation.

I love how two words have such potential in their meaning and approach. It is the same as ‘divergence or convergence’. They clarify distinct differences, you don’t merge them, and you treat them as one leading into the other (divergence into convergence) or running in parallel (exploration & exploitation) for good reason.

The exploring and exploiting does needs separation. In organizations that practice ambidextrous design they separate the new, exploratory units from their more traditional, exploitative ones, allowing for different processes, structures, and cultures to emerge but it is at the senior management level they maintain tight links. This way you can pioneer more breakthrough or even disruptive innovation while allowing the incremental gains to be focused, and optimized without this consistent set of  distractions of trying to balance the two within the same resource pool or trying to squeeze it through the same assessment and time line process.

It is very different when you have to go on exploratory expeditions which are harder to determine and the last thing is having the constant pressure of balancing for time and between types of innovation. Exploration & Exploitation approaches need really different measuring metrics also.

It is at the senior leadership level any conflicts are managed not within the unit or organization department or even by a head of the unit if the organization does not manage in this ‘ambidextrous’ way. If you attempt to manage these together I think you don’t extract the full benefits you can gain from a more dedicated focuses working on distinctly different innovation needs.

What does radical mean to you?

The other issue I have is the use of ‘radical’ within the discussion. This can create such different meaning for each of us and can certainly be preconceived, so it already becomes hard to let go or change. Also ‘radical’ is often felt in larger organizations as something that simply does not fit as they are not a radical organization but a careful, often too cautious one. So ‘breakthrough’ seems to be a more natural fit and sits opposite of ‘incremental’ far more in my mind and it seems most others, worried over the ‘radical’ label. For incremental you exploit  through upgrading, adding more choice or building on what you presently offer, whereas you explore far more for breakthrough projects.

You can rightly point out there are numerous different type approaches and I recently wrote on what is the appropriate design within our organization (http://bit.ly/zdUhKp ) using radical I know. Your type is partly determined by your structure and its degree of optimization of its potential flexibility and what you need to achieve.

So what are differences to be recognized for Exploring and Exploiting?

The understanding has to come back to alignment, the alignment to strategic intent (of the innovation need) and the recognition of distinct differences in critical tasks. It is defining the differences is the role of the leader, who is either managing incremental or breakthrough innovation,as they should focus on different competences, controls, rewards and the environment you are expected to work within, to deliver these as effectively as possible. It is difficult to ‘flip’ between the two as they call for distinct mindsets.

Again it is the power of the difference in thinking about these. Using the comparison of exploitative versus exploratory in this two word comparison that I love, does give you the real differences in the focus that needs to be recognized and undertaken.

Exploitative focus Exploratory focus
Incremental Breakthrough
Cost Growth
Operational Entrepreneurial
Formal Fluid
Rigid Adaptive
Linear Self-organizing
Attainment Grasp
Efficiency Experimenting
Development Research
Continuous Discontinuous
Inside-the-box Outside-the-box
Analytical Investigative
Examine Explore
Verify Detect
Extract Probe
Protect Challenge
Productive Milestones
Lower-risk Risk-taking
Directive, top-down Visionary, involved

I’m sure you can extend this list even more but the point is that the difference in mindset is significantly opposite. Can you apply these within the same business group or unit? I seriously doubt it.

Eating from the same innovation stew pot everyday might not be the best solution.

As we think of innovation we have to be careful not to limit ourselves, not just in approach or types but in the way we set about and manage this. Trying to bring all aspects of innovation activity into one ‘pot’ means you end up with a often underwhelming stew. It simply fails to really deliver, as you failed to do the necessary separating and distinctive preparations that all the parts needed to be achieved as your end result, to meet the different market needs that are around.

You need to seperate. Innovation that sets about protecting the core, building and strengthening it and that that pushes and extends the business beyond this really do need really different mindsets in approaching and managing across the organization.  Not just in  isolated pockets struggling to balance the different demands being placed on them.

Within these ‘collective’ silo’s they can’t differentiate distinctly enough and until this is fully understood it constrains and adds unnecessary pressures. Unless you address this  it is never fully appreciated across the organization on what is needed to be going on and how you should support and measure it’s results. Bundled up it all becomes a compromise.

There needs to be this realization that incremental and breakthrough are so different in activities, processes, structure, cultures and metrics to achieve the optimized effect. Having a clear seperation in managing incremental and breakthrough innovations is more effective and efficient but please don’t tip them in in the same pot, but distinct and seperate innovation ‘cooking’ mediums, to achieve a more outstanding and differentiated set of results where compromise was not down to being mixed into the same general approach.

Innovation has layers that shear against each other.

“Slow constrains quick, slow controls quick”

There is so much built in tension, bias, barriers, mindsets, mental model conflicts, and all types of friction seemingly going on around us, you must sometimes think all our organizations can only be totally dysfunctional.

The Scream by Edvard Munch for Dysfunctional Organizations

Has anyone not come across some or all of these?

Dysfunctional leadership symptoms and those typical warning signs of dictatorial leadership, no feedback on performance, personal agendas, more ‘political’ compensation than ‘performance related ones, inefficient use of resources, empire-building practices, unequal workload distribution, too much management, fragmented organization efforts.

There is simply just too much talk, ineffective  and incessant meetings, a lack of collaboration across departments, ‘selective’ low productivity when you are working way beyond the normal, feeling in a constant crisis mode, watching a morale deterioration take place before your eyes, the,  backstabbing, starving projects of essential resources and finally, working in highly stressful workplaces.

A pretty depressing list isn’t it? I’m sure you can think of a few more besides.

When you are up against some or all of these how can you feel trust, belief and be innovative? Partly from what I’ve been reading and from my own perspective let me offer some thoughts to reduce some of these unhealthy tensions organizations seem to have, that certainly act as real constraints for innovation to really take hold.

How can you break into this and design something different?

Recently a number of comments have triggered my thinking about this whole area of blockages that seem to not allow innovation to take hold in organizations the way it needs too. The writing of Scott Anthony recently under the article “Negotiating Innovation & Control”, the book “Relentless Innovation” and stream of thought provoking views of Jeffrey Phillips wanting us to challenge the “Business as Usual” approach.

Then we have Gary Hamel in his new book “What Matters Now”  where he shares his agenda for building organizations, that can flourish in a world of diminished hopes, relentless change and ferocious competition. This is not a book about doing better. This is an impassioned plea to reinvent management as we know it—to rethink the fundamental assumptions we have about capitalism, organizational life, and the meaning of work.

Each has a theme running through them in different ways, the need to achieve continuous innovation needs a massive change in mindset and in managing the ‘heart’ of the organization. This heart is unhealthy and will need new values, new processes and new belief systems. You add in calls from John Hagel, John Seely Brown, Ranjay Gulati  and countless others, we are in need of a more radical agenda to rethink management, not just for innovation management.

The legend of the Gordian Knot

Some time back Chuck Frey, well known in innovation circles, wrote about the Gordian Knot. “For people the world over, the Gordian Knot represents the difficult, the intractable and often the insolvable problem. Today’s systemic business problems are the modern-day equivalent of this seemingly impossible challenge.

According to Greek mythology,  the huge, ball-like Turkish knot with no ends exposed was impossible to untie. An oracle had predicted that the first person to do so would become the ruler of all Asia. Thousands of people had tried, without success, to unlock its complex riddles. Alexander of Macedonia, son of King Philip II of Macedon, solved this puzzle simply and very creatively – by cutting it in half with his sword, exposing its ends and making it possible to untie. Alexander the Great went on to conquer all of Asia, just as the oracle predicted”.

Cutting the Gordian Knot

So how can we cut the intractable knot inside organizations and survive?

We all face increasing uncertainties and are having our trust battered. We are seemingly not rising to the challenges that seem to be growing in complexity in global and organizational context.Innovation has a vital role to play but it must be ‘treated’ differently.

Where do we start? Firstly we need to revisit the work on “adaptive enterprises and systems”. We need to find ways to deal with unpredictable, discontinuous change and make this more predictable for us to manage.

We lack often a real coherence of purpose; we lurch from one opportunity to another, from one quarter of results into another with often no consistency in our activities. Performance has been taken over by opportunistic behaviours.  Innovation often takes the real brunt of this.

Our intended strategy, moves suddenly into a deliberate strategy, and then somehow this gets abandoned or unrealized and slowly we replace this with a emergent strategy that is rapidly become our realized strategy that we present to the world, as a response to ‘factors outside our control’ for our often indifferent performance. Who really talks about the EXACT results achieved from innovation for instance? All we hear is just a general reference to it, to cloak innovation often in the ineffectiveness that lies within.

For innovation and many things going on within organizations they often lack a real coherence, they ‘signal’ inconsistent behaviours, especially within the organization. These bad signals simply build up all the tensions and dysfunctional aspects that middle order management and the organization in general has to mop up and cope with.

How can innovation thrive in this sort of chaotic mess? No wonder it never takes hold, it just has nothing ‘permanent’ to attach too and grow. Management needs a radical overhaul so innovation can be the vehicle for what is articulated but often poorly delivered on a consistent basis.

Context & Coordination needs designing in purposefully.

Again, where do we start? We start with ‘disconnect’ that organizations often have. The understanding of the underlying purpose of the organization beyond just making money and keeping the shareholders happy does need a deeper primary function, it needs rearticulating. Some organizations do a reasonable job of this but many simply don’t.

We need to restate our primary function and purpose far more in its societal contribution. We need to express the bounds as a governing set of principles that are known, reinforced and measured against. We then need to set about building in a consistent way, the capabilities that are able to produce the outcomes.

We need to build in the accountabilities into the roles that reflect that innovation, effectiveness and efficiency that is needed so they can be managed equally side by side. We need to teach the ability to be adaptable and recognize the differences so as to actively manage the ‘creative’ conflicts and tensions.

Reduce the tension in the layers or structures

The really hard part of managing in larger organizations is in managing the layers and competing forces. Often we forget to reinforce acceptable behaviours, we leave role structures lose and incomplete and we set deliverables in often ‘woolly’ ways. This just promotes uncertainly and it is not an adaptive organization in leaving this so open. These unnatural built-in tensions create this shearing effect. They grind against each other, like tectonic plates that force further disruption and upheaval.

These different layers actually require several levels of reconfiguration designed into the organization. One really critical one to address and to ‘kill off,’ is the pressure of time. Time horizons to achieve different tasks often cannot be ‘legislated’ or ‘dictated’ but sadly they are forced on reluctant innovators responsible for delivery of new concepts.

We need to re-establish the difference between goals– within a certain period covered (one year), objectives– attained later but are progressed within the period and finally ideals– those unattainable but clearly possible concepts, that progress at slower rates and go well beyond normal goals. Innovation works within this environment, actually it will thrive.

Not just the incremental, but the radical, disruptive and breakthrough innovation craved for by the top management, can finally have a ‘decent’ time horizon to be managed through. Planning needs to account for all three horizons and publically discussed, irrespective of the industry you are in, it does not matter if you are building planes or developing food products.

We really should stop pretending that innovation is not so hard and actually state it is often incompatible to much of what we perform on a daily basis. The task of managing intangibles (unknowns) alongside tangibles (known’s) needs greater appreciation of their complexities, and the difficulties of balancing the two for achieving  a ‘decent’ result.

Leadership, I believe, would need to understand innovation far more in this demanding environment of enquiry. No wonder it is often ducked and just vaguely talked about as much of innovation understanding is still poorly understood in its impacts and effect.

The opportunity of the network economy

Again, the realization of the growing web of networks that we are constantly engaging with, is become a growing part of the new more adaptive innovating enterprise. We need to encourage more empowerment to engage with outside parties, to explore, to investigate, to bring in and then diffuse and disperse in new ways. For this we need to design around more absorptive capacity I’ve often written about. (See   http://bit.ly/zdfmba).

Reducing activities and replacing these with outcome orientation

Innovation is no different from what we expect from efficiency or effectiveness; we want to see the outcomes.   We have struggled on many parts of establishing the really good metrics for judging innovation. They seem to get lost within organizations. Part of the innovation activities has been assigned to some other cost centre, or the capacity was already established and we often don’t break these down and assign these clearly enough to the different activities, we should, but into outcome orientation ones. Were the activities contributing to efficiency or innovation? We judge these through effectiveness of the outcome.

We need to balance existing performance engines for repeatable everyday tasks with innovation delivery engines for new activities to make our organizations function more effectively. Vijay Govindarajan and Chris Trimble have offered some thoughts on this at the implementation stage, although they are still needs more examination.

As Scott Anthony points out in his article “Negotiating Innovation and Control’ on the different ways to balance tension there is one, in my opinion, that needs deeper investigation and development and that is the ‘ambidextrous’ one. This makes distinctions but links the parts of the whole organization by developing competing frames, not competing forces. Roger Martin suggests in one of his books “The Opposable Mind” that we need to develop “integrative thinking” as part of this need to change.

Ecosystems often reflect the shearing effect.

In any environment the ‘rates of exchange’ of the different components or constituents operate at different speeds. Interactions occur more at your own level of contribution, the different layers sometimes you are simply oblivious too or ignore. The ‘in-spite of’ syndrome kicks in. Sometimes though, something catastrophic does occurs and you have to pay attention ( a merger, layoffs, threat of closure) but the real reality is, different layers within organizations tend to be often simply oblivious, even impervious, to necessary change and just ‘does its job’.

Maybe then, this is why so many organizations seem dysfunctional but do continue to survive, to limp along, until something really does disrupt their world as the existing ecosystem just seems to allow different interactions and speeds. Can we not alter this though in more thoughtful ways. than the ‘carrot and the stick’ approach or ‘fear and retribution’ methodologies often employed to achieve results?

The worrying thing is any dynamics within the system are dominated by the slow components, and the rapid components simply have to follow along. Slow constrains quick, slow controls quick. The only way to ensure a speeding up is to be coherent on the purpose, clarify the bounds and governing principles that need to be enacted.

Simply by consciously working on all the dysfunction points within an organization will certainly reduce the tensions, reduce the shearing and allow the organization in all its layers to ‘react’ and be allowed to come back into a balance, where innovation sits equally alongside efficiency, especially if both focus on outcome orientation and that certainly is not the current business as usual we see today.

Perhaps working on these dysfunction spots it might free up some real, much needed space for innovation to take a deeper hold. It does seem with all the suggested emphasis on efficiency and effectiveness, if you accept this argument, it might be a good idea to have innovation alongside, as it does thrives more when there is creative tensions around!

Is innovation today expected as the panacea to solve all our problems?

I am getting increasingly disturbed. This week two people I know and respect have been talking about the innovation effect. Is innovation the business process re-engineering of our decade; is it part of a bubble like the the dot.com boom. Is innovation simply a fad and fashionable to talk up when we are in the present economic uncertainties? Is innovation durable or will executives move on to new ‘feeding grounds’ as they smell that possible wind of change?  Yes, possibly, I hope not. Innovation is still a very furtile feeding ground.

Innovation is meant to be the catalyst of fresh jobs, new growth and leading us all out to the promise land of wealth and security. Can we place such a burden on the slim shoulders of innovation?

Politicians here in Europe and America are using the past tool kit of tried and tested methods to kick start their economies, restructure the mountains of debt we have accumulated and generally stimulate growth. Our economies remains stuck, entrenched and resistant, even some are about to possibly plunge even further back.  So it becomes “time for playing the innovation card”.

Is innovation leading us to the promised land of milk and honey?

I think we are all getting a little cynical about leaders’ motives and intentions when leaders attempt to deliver inspiring messages, many people react with scepticism, question whether leaders are just trying to work them or us even harder. It often leaves a bitter taste, not a taste of future promise.

Work for many has changed in its central position. It has moved from having a higher meaning and purpose as it is increasingly felt as individuals we are not really making a difference. Ah but through innovation you can, goes the mantra.

The problems today are very structural and systemic. We are all being measured against past performance, against other people, against other organizations, against other countries, the messages are unrelenting. Our solution is to become more innovative. Often these are one shot solutions. Do they advance us, most probably not much but we need to be measured. Do all these one shot activities help us or are they simply short term?

We have also lost identification with our public leaders and our institutions. We increasingly see them as obstacles to progress; we see them as not very innovative.

Overload and the crisis of no time to focus

Today we are bombarded with information, with knowledge, with data 24 hours of constant streaming if we want it. We have difficulty in switching off. We constantly look for all those breaking innovation and wealth creating opportunities. Regretfully we are on a horrible treadmill and asking innovation to help us get off it is not a solution. It helps, yes possibly.

Steve Deming wrote a series of articles on his Forbes blog, start here http://onforb.es/iQiMrr about the sorry state of innovation. It is depressing reading. It does seem innovation is not succeeding. Can we change this, he thingks it is, yes possible but we have to radically change our thinking about innovation and its part to play in the bigger scheme of things.

The EU announces a state of innovation emergency

This week the European commission issued its Innovation Union Competitive Report, it is long, detailed but thankfully has an executive summary. Start here http://bit.ly/jzE7w6. The upshot of the report, the headline is “Europe’s innovation emergency”. Innovation performance needs major improvements in many areas if (note if) the Europe 2020 strategy is to deliver on its promises. I don’t want to sound cynical but I just get the feeling of “no chance” will we deliver on the promises with where we are and what is facing us.

  • Innovation delivery is tied to Innovation Union and as most people know Europe loves the idea of union. The problem today is there are many worrying signs that the dream of EU ‘Union’ is about to implode with the public financial crisis, that is not going away with the heavy dose of austerity measures needed by most. Excuse me, but how does innovation flourish in austere times, usually not very well actually. So innovation is becoming the whipping boy. Yes probably.
  • The EU report suggests we need to be more innovation ‘smarter’ by focusing on specialized areas of activity. The difficulty for me is many of these offer limited jobs and simply chase the ‘smarter’ qualified person. So we get some wealth creation but for a narrow band of (lucky) people and have we not just been through one of those bailouts for the banking sector? So more of the same solution as policy suggestions for innovation. Yes probably.
  • We are asked to invest more in research and innovation. The EU is slowly advancing towards a target of 3% of GDP to invest in research and development. The problem I have with this is this:  there are so many reports disputing this R&D focus is the real growth area, it should be in entrepreneurial start ups. I tend to feel this seems to generate more jobs but start ups are having extremely hard time raising money from the financial institutions. We have not yet achieved a structural change to a more knowledge-intensive economy.
  • We are also told we have weak framework conditions that are preventing our knowledge to flow and be transformed into marketable products and services. The developed world is most likely continuing to lose ground in the exploitation and translation of innovation.
  • Many commentators have spoken of a new deal, to get the many back to work. This is based on knowledge and being innovative. The reality is our education system; many within our work forces are not as equipped as they need to be to make this knowledge intensive switch. We will have to wait for significant changes in our education direction, significant upgrading and retraining of many knowledge unskilled people to make this critical change. Yes probably.

Innovation can be the growth stimulus, not our current tired formulas of financial bailouts as the approach.We need stimulus not proping up the weak.

Is innovation our stimulus? Innovation remains often abstract, certainly over used, and not well understood by most people on its full force and ability to deliver but can it, when it often stands on its own and everything is expected from it?

Innovation is expensive to do well. It is now global and access to knowledge is essential; Innovation can also be very slow and incremental but it can be disruptive, revolutionary and amazingly quick in generating growth and jobs. Innovation is a community endeavour, it dies in silo’s and we need to increasingly find ways to wire and connect ourselves even more to leverage the collaborative nature innovation requires.

Innovation requires resurgence and deep commitment

If innovation can be our answer then it needs a clear resurgence. Innovation needs a place at the top table of politicians, businesses and society and not just used as the star attraction, called upon to divert our attention from all the issues that are around us. Innovation can lead us out of this mess but it has to be ‘front and centre’ in its importance but it has to be fully understood. Is it by many at this time abstract and lacking the defining meaning of why innovation should be treated with importance?

Innovation to become part of real sustaining policy needs to be re-thought. Innovation by its nature needs to be nurtured by the process of discovery, the linking of insights for creation and exploitation of new ideas by entrepreneurs and business alike and translating them into a new end result.

Innovation is uncertain, lets simply recognize that and move on

Innovation is by nature radically uncertain, it is very unpredictable, although Governments believe they can capture innovation activity but they don’t. We need to encourage experimentation and ideas even more; luckily we still have our creativity even if we don’t have access to the means to deliver on it. This is where we should be spending our money, not in bailout of old institutions or 20th century industry models but on experimentation and exploration of the new work factory, collaborative innovation sharing, to solve our societies and planets big issues with inventions that generate a new deal that transform us away from current dependencies the planet is rapidly depleting.

A new melting pot of delicious innovation stew

We need to find a new ‘melting pot’ where innovation forms the central ingredient but it really does need plenty of other components or constituents to be readily mixed together to produce this elixir of new jobs, growth and wealth creation, it can’t simply stand alone. It needs to change from the whipping boy to the poster boy but it needs a sea change in our thinking or it does go bust and fail to deliver on all those promises being made today.

Innovation needs attachment

So is innovation dead, is it about to go bust, to end up as another nice idea?  I hope not, it is durable but in a different form than we currently frame it in. It is time we put innovation really to work but it has to be ‘attached’ to something specific to thrive and grow upon. It can have durability if we understand it better and invest in it. It needs to be fixed firmly onto something else. We do need to do this mind shift in innovation understanding now though, we just can’t simply keep talking about it as the ‘magic’ dust you sprinkle around.

The Challenges of Real Change Required by Innovation Consultants

Recently I was reminded of an article by Daniel Krauss, writing on the Forrester blog site (http://blogs.forrester.com) about the “Path to Revolution In Management Consulting” which lead me to reply to his question of “what constitutes a management consulting firm 2.0?”

I’ve adapted my view here to reflect where it becomes even more relevant to the innovation consulting companies that I feel are in general struggling in today’s environment, for multiple reasons.

The challenge today lies for many in that they are not providing real consulting value to clients, and unless this will change it will continue to erode the clients confidence in these service providers.

In many ways, the consulting industry specializing in innovation is its own worst enemy. They are resolutely staying very internally driven, self promoting, still trying to convey the story of mastery, when clearly this is lacking and due to this failing the client. The client is increasingly requiring more organic or holistic solutions not a piecemeal of innovation offerings. These separate pieces often don’t dovetail into one complete innovation system because they are supplied by a variety of different service providers, all having their own ‘pet’ approaches.

Why is it when many clients who are actively working on innovation challenges have moved to a more open collaborative platform for obtaining and underpinning their own internal knowledge for product development? Clients have embraced (sometimes admittedly  reluctantly) into entering strategic partnerships in supply chain, purchasing, HR management and a host of IT related activities, in research and development.

Clients are pushing even closer to engaging the final consumer within the understanding of meeting their needs, or working to discover the ‘unmet’ needs. Yet the innovation consultants are still a different story of being closed up, reluctant to open up and gain from more divergent thinking on the problems these changes are causing to clients.

Consultants are far too cautious for their own good

Consultant firms on the other hand are moving far too cautiously to any form of collaborative form, they tend to bring ‘experts’ in for ad hoc, one-off assignments when they need deeper expertise. Wherever possible consultants want to manage as much as possible internally to ‘keep’ the fees generated inside. This is not a recipe for building lasting relationships that have mutual value in growing understanding. They stay in-breed and are not reflecting the commonly held view today, “that all knowledge does not reside within its own walls”; they still reluctantly hang on to the closed system of inventing only inside here. This you see in the host of variations on what is claimed as their versions of “common innovation” theme for processes, systems, idea management etc., and often ‘mutton simply dressed up as lamb’.

I see an awful lot of clients experimenting and learning internally and due to this becoming extremely selective for the use of any outside advice. For many of the innovation consulting firm this means they are often far too busy catching up, lagging in their own emerging practice and due to this ‘lag’ have lost any thought leadership position in many things relating to innovation. To overcome this you need to be engaged, to be able to piece together fragments of information to gain the insights that independence can offer.

This requires dedicated experience and constant involvement in broader innovation understanding not in the way it is going of specialization, who let slip the critical insights as it is ignored as it did not apply to their narrow area of knowledge. Sadly general well experienced innovation practitioners are thin on the ground. You do need to search hard for these but they are available. Also large consulting practices can’t afford to have more than a few experts scanning this innovation terrain.

Exceptions and Client Needs

Of course we have notable exceptions; the value in what Bains, McKinsey, Booz and PWC has is often in their access to C-level people and their ability to provide reports on best practice to help in benchmarking industries and practices around organizations current thinking of innovation. The conclusions though are often are not translated into practical solutions, they remain research findings. These help all of us involved in understanding emergent innovation practice to relate and absorb the findings but these on there on are not enough of the answers clients are looking for from external service providers. They want to connect the thinking to improving practice.

Clients often lack real deep insight or draw out the implications from these emerging practices, they want to work more alongside others in experimental practice spaces to truly figure out how to respond to them or understand the implications to their own business. It is only part of the innovation knowledge puzzle for the client. They need to constantly look elsewhere to piece this together, if at all they can, as so often the reporting looses much of its value as it is not translated into suggested solutions if the consulting industry fails to provide these services or knowledge laboratories.

Clients are forced to seek out for themselves, through informal groups or ones organized by industry necessity to piece together their understanding, a little like a patchwork quilt. Where is the previously respected “trusted” adviser, the consultant within this, often sidelined or desperately trying to muscle into the discussions for their own gain? The value of taking and translating all these disparate reports into new suggested models of practice seems not to be important.

Why are consulting firms not working methodically through the “collective” summary of these reports and then distilling them into emerging ideas as a development engine? It does seem this “connection” to much knowledge is not being valued and pulled together and the ability of having these dissected and  interpreted,  is lacking by most consultants, even the ones providing the reports, so clients are left to interpret it themselves. This can’t help the client/ consulting equation and many mistakes can be made in wrong interpretation as environments and circumstances are usually unique. This is where external advice can score significantly in explaining differences and providing appropriate solutions that still merge in the emerging practices but to fit that specific client’s situation.

The absence of the large consultancy in innovation forums – why?

Why is it that the larger consulting practice is often absent from forums, conferences and internet live exchanges? Also due to their increased absence, others are gratefully filling this space but perhaps not as well. I’m not talking about the software solution providers here; I’m talking about the strategic consulting heavyweights. This has some advantage for the ones filling the space but without the large consulting companies driving innovation insight as they do have the global insight and resources; most innovation consultancies hang onto existing, tried and tested methods using existing tools and techniques and don’t push the boundaries. They are often not in the position to do this. So the reality is, Innovation is not evolving as well as it should do, as it presently does not have this ‘bigger muscle’ to drive and push for change often generated by the big consulting houses. They presently seem to be highly selective on their innovation focus and that is more constraining to all and not helping advance the practice of innovation management like it could be.

Global consulting practices are being driven more by the numbers, by the ability to utilize and leverage pieces of work to obtain a return. It is less in consistent, ever-present engagement in all avenues of social dialogue, consulting has become more of a “roll up your sleeves” and pitch in to help. This lack of reflective consulting between where the collective presence of consultants, clients and employees engaged in innovation can regularly meet to explore more of the “what if?” is not helping consulting firms, or clients in interpreting the sets of front line signals and turning these into consulting opportunities on shifting many current established practices, processes or methods. We are losing innovation opportunities as we fail to translate these ‘signals’ and advancement in leading practice.

The move of clients building their own internal innovation capabilities

Lastly in this critique, clients are increasing building up their own internal-in-house innovation consulting capabilities, not just in execution but in design work. This denies consulting the necessary working practice, or playing time to experiment, to explore, to learn and translate this to the benefit of many.

These shifts, along with others that make up an increasingly long list are eroding the position of the innovation consultants. I think there is a time for a sea-change to take place.

So let’s firstly summarize the bigger challenges in innovation consulting:

  1. Clients are facing an increasing fragmenting industry of many niche consulting players. This is becoming more the ‘boutique’ service providers who have limited scale and global practice but is really matching the clients’ ideal profile of global span and support? It is a constraint that requires clients to continue to build internal capability with its different but perhaps similar cost profile.
  2. The inability to provide broad innovation experience or capabilities. This is another negative working against many consulting firms. Many of the partners have been out of their respective industry for a number of years and fail to appreciate the real ‘heartbeat’ that someone closer to it can detect, they have been removed from day-to-day activities far too long and often the pace of change is hard to keep up with. They are increasingly reliant on others to form opinion and does that replace their experience that got them to where they are?
  3. Forward thinking innovation centers within consulting are rare. There is so little contribute into the fresh knowledge stock, always needed by consultants to present their constantly updated “case of relevancy”. Often research is simply a re-hash of older material. A new solution has to be found to strengthen the innovation knowledge stock.
  4. Sophistication & specialization is highly sought after but expensive to keep around. Having this expertise sitting on the bench within one consulting company is regarded more as a cost liability and not as a valuable asset.
  5. Strategic understanding in fast changing, complex markets and organizations is extremely hard for outsiders (consultants) to grasp in the detail required. To be able to contribute into clients that are facing complex problems and to navigate these ‘fast flowing rapids’ needs a real sense of the pulse. All these are within the challenges to be resolved within the consulting industry.
  6. Limited experiments are currently being undertaken in the innovation consulting practices. The focus is far more relating to taking best practices and applying them to as many clients as possible. Critical thinking in innovation is hard to justify. Experimental innovation is something clients are very unwilling to pay for yet they actually should be crying out for this, so as to gain competitive edges from these insights. This is a huge challenge to overcome. Trust and reputation as thinkers in innovation helps but there is equally a reversing on offering the same advice to all, willing to pay. Some client/ consulting advice should be mutually exclusive.
  7. Partners need to change their remuneration models that drive the consulting business. They focus in industry specific domains in general yet clients are seeking beyond their own borders increasingly to gain fresh insights and competitive advantage. Are innovation consulting companies leveraging across industries enough? A traditional breakdown, of which consulting company is best known for, and used to solve specific problems, continues to reinforce expertise and limit broader advice. This is not serving the clients well, although it is ‘claimed’ consultancies reach across industries for insight and possible application. This does need greater cross-fertilization focus as it is potentially very valuable. This lack of active search across industry is a vicious circle that needs breaking into more, so as to expand capability and capacity and offer broader innovation practice techniques and options for clients to explore.

All these are within the challenges yet to be resolved within the innovation consulting industry.

A bolder, more open collaborative model is required.

  1. Consultant companies should become the host and be the potential ‘orchestrator’ built through platforms for the ‘best’ to gather and collaborate.
  2. Clients are learning how to collaborate, to network, to leverage and tap into outside domains, I think consultants must make this fundamental shift- embrace the old (consulting) enemy, their competitors, and seek the places of complimentary knowledge that when combined can offers clients the very best, not the reworked second best.
  3. There are growing sources of advice alternative- clients are recognizing this and seeking it out. The growth of niche consultancies, the use of academics, and the ability to reach out and pay for the top expert in their field excludes the specialized consulting firms more often than not. Thought leadership is not residing ‘within’ but outside and consulting needs to find more imaginative ways to pull in this expertise to add the value clients want in diversity and understanding.
  4. Clients are increasingly willing to bring together diverse advice. The consulting company that provides a platform/ conduit for a community of experience extracted from a rich diversity of backgrounds to work together on bigger than usual challenges I feel would be appealing to clients. These collaborations do not have an in-built expensive overhead to support or a forced umbrella identity.
  5. The appeal of bringing together experts that can come together and work on specific complex problems and then disperse has great value. It is through these expert interactions it can offer a different approach than we are seeing today. These ‘event’s’ or challenge outcomes can then be broken down into the ‘discrete’ parts necessary to drive solutions and can be parceled out to increasingly specialized firms that work on the part within the value solution that contributes to resolving the complex problem.
  6. The need today is to have real access to great quality thinking and this does not reside within the walls of one consulting firm, however large in employees (often repeating the same thing).

A possible resolution or is it salvation for innovation consulting.

The resolution or (salvation) of consulting is to build transparent networks of expertise, brought together on platforms provided by the nominated host or consultant, so clients see and value the access to broader, best available expertise that is working through their own, often unique challenges, not being felt as ‘cookie cutting’ recipients.

Complexity, uniqueness and expertise need to be addressed in more customized ways and that challenges the existing global consulting model of maximizing repeatability.

A new model needs to combine the following on a given client platform, hosted an orchestrated by the lead Consulting Firm based on a reflection of today’s ability to pull in the best advisory and thought leadership to solve unique client challenges:

  1. Establishing clearly the Business Model coherence & the Challenge clarification/ analysis and ensure this is communicated across all the collaborators working on this solution platform.
  2. Providing the Platform Management through collaborative software that allows all the best parties to collaborate their ‘given’ piece and the lead consultant coordinates and extracts the best value from these parts.
  3. Open to all collaborators the strategic intention and the modularity construct so they see their contributions and part to play.
  4. Process analysis and mapping techniques that are common and freely available to all to use- a standard of tools and techniques that all participants are familiar with too leverage any exchanges or concepts between the participating parties.
  5. End to end customer and supplier interaction points, well thought-through and managed by the lead consulting party to extract the best insight, foresights and their value in unique combinations.
  6. Co-creation, co-production and collaboration being actively encouraged, integrated and visible to all to build this value even further.
  7. Provide common shared tools, standards, IP, protocols and know-how protection/ transfer and validation governance.
  8. Ability to experiment, test hypothesis, pilot and rapidly expand within the platform collaboration to advance and validate thinking and constantly search for the up scaling needed.

Henry Chesbrough wrote recently in his “Open Services innovation” book about the commodity trap, this applies equally to the consulting industry, it is certainly not immune. There are new disruptive forces in play, these are placing limits on the existing innovation consulting model as a healthy business model. Perhaps it is near to its end, and consultants need to change their thinking and then the approaches fairly radically to stay relevant and thrive

Orchestrating a more open diversity of knowledge on collaborative platforms needs a significant change in consulting, that you could argue applies to all consulting practice. Clients demand more value and for consultants to regain their position as providers of expert knowledge they need to become the ’orchestrators’ to add value and deliver propositions that tackle clients increasing complexity in more open ways, otherwise they will face an increasing marginalized role.

(revised and updated on 19.03.2012 and re-posted)

Moving towards a more distributed innovation model

How are we going to really unlock the true potential of frontline managers, middle managers and the whole workforce for ‘seeing’ and engaging for their contribution to innovation?

Far too many organizations still don’t provide the opportunity for everyone to contribute to innovation. I think as open innovation moves from the labs and research centres OI will be one of the ways for a shift in thinking to take place, not just with the outside world but within the inside organisation for a number of reasons.

Critical needs of open innovation are the trust, the behaviours and the relationships that need to be at the forefront of thinking when you engage in more opening up to fresh avenues of innovation thinking. I think this changing mindset of how to manage within will permeate throughout the organization more and more as these (often dormant but available) skills get put into practice more.

We struggle to get rid of the ‘command and control’ approach to encourage more distributed sharing and exchanges to reflect the need today of being more agile and fluid in how we meet rapidly changing market conditions and counter threats or seize breaking opportunities.

How can we influence leadership in everyday contexts?

As a starting point to distribute innovation we need to reset the innovation mindset. Formally appointed managers will never achieve without gaining the respect of the people around them, which is simply a common fact of life! We still have incredible difficulty learning this in many organizations. It does seem a more distributed leadership structure built on individuals who have strength to influence others is more likely to succeed- the respect of your peers has greater power than impose and control.

We often recommend organizations seek out and appoint passionate champions (W L Gore) or ecosystem champions (P&G) to organize and influence innovation work. There is a lot of research work presently going on that is studying the type of behaviors, traits, characteristics needed for these pivotal innovation roles so they can be used for the appropriate need to encourage and ‘push’ existing initiatives or champion new ideas. It can flatten the organization structure.

The flat lattice organization is a start.

W.L Gore practice a distributed leadership model that has a ‘lattice’ structure where they discourage hierarchy, titles and trying to impose and look to encourage the ‘voice’ from within the organisation to self commit and identify in a culture that demands each to offer their unique contribution to delivering innovation. They work on achieving respect throughout the organisation based on a fascinating set of disciplines NOT rules and hierarchy. They build into everyone’s job innovation.

Distributed innovation requires a flow of knowledge

Innovation has many definitions but one I might mention here is it is ‘doing new things or improving existing things that add greater value’ is a great place to start for everyone in your organization to actively seek out their potential contributions. If we feel our contribution is valued this becomes a powerful motivator not just to turn up for work, but to engage in new productive work. It becomes a more dynamic environment, not static to work within and just attempt to identify with.

What is changing constantly around us in this distributed innovation need and we need to put a better system in place to capture distributed knowledge. Networks are giving us all that incredible shift to ‘connecting for value’ not just ‘discovery’, we are constantly needing to re-arrange, recombine, react and explore to problem-solve and often improvise on a daily basis.

Recognizing  what helps knowledge to flow in a distributed innovation model

–          Recombination’s and connections will help us within a more distributed innovation society to manage.

–          The geography of innovation knows no barriers. If we don’t operate in a more distributed way we are going to miss so many ‘breaking’ concepts that are occurring in innovation on a daily basis. We need to capture these. This requires front line effort and capital but by distributing the task, you have the chance of a greater knowledge flow.

–          How do we cultivate ‘global people’ power? In a world of changing knowledge we need to recognise that educating and informing our people and our network of what we are doing will lead to contribution, to the capture of knowledge and reveal the skills dormant in us all to indentify productive knowledge.

–          How can we design for greater learning? How can we turn knowledge into innovation potential?

–          How can we build in greater levels of collaboration and adaptability? These are human dimensions we need to encourage by distributing the tools and clarity of purpose to those within our company to ramp up the innovation pay-offs increasingly expected.

–          Innovation is full of ambiguity, often little clarity so you need to give your organisation that greater freedom and permission to investigate, capture and push back knowledge through this distributed innovation network.

Distributed innovation needs to cultivate Absorptive behavior and allow it to flow.

We need a system to capture and allow knowledge to flow. For me the adoption model seems to be one worth investigating. If we want to achieve the goal of distributed innovation we need to have in place this possible framework. Nesta (www.nesta.org.uk) produced a report some time back called “innovation by Adoption” and I feel this has a good framework that support distributed innovation.

The report argues in a place with a strong absorptive capacity three main outputs subsequently result from the flow of external or distributed knowledge: (1) the creation of new innovation; (2) the creation of new knowledge; and (3) that it does lead to new economic and social value.

Innovation by adapting the adoption model within your distributed innovation needs.

If we agree that most innovations happen outside often self-imposed boundaries then we have to extend to all our boundaries and beyond. We have to open up. We certainly understand that today innovation is not confined with the walls of one particular company. The world ‘absorbs’ more innovation than we can turn into greater value but we need to attempt to capture this and see if and where its value might lie. This is going to be achieved more likely within a distributed approach asking everyone to contribute to innovation ideas and providing them on a consistent basis the likely content and context fit that they need to look for .

We need to continue to push innovation created often locally, back up through the organization so it can potentially turn these insights into  innovation that will find a place in our world that improved on the existing that was something that we contributed too, that can be highly motivating. For this to happen organization have to recognize the inter-dependency and reliance that a diversified, distributed engaged group of people can bring to accelerate innovation to share, explore and work on turning ideas into new solutions .

What we need to find is ways to absorb this flow of daily knowledge, quickly recognize where it might meet our needs and then fit these to the wider audiences available that search for innovative solutions. There is an awful lot that can derive from a more distributed innovation network that allows a greater flow across a networked organization.

Approaching absorption in two ways

Absorptive capacity captures and enables this flow in each direction. Nesta through its research into this absorptive need  also suggested a model called the AC/DC model where they argue you need to develop two broad sets of capacities: the absorptive capacity (AC) to identify, value, and assimilate and the development capacity (DC) of places to develop and exploit such knowledge.

AC/DC Model

We need to adopt a more distributed innovation model in our thinking

Applying these two models into your thinking to achieve a more distributed innovation model would help to capture, anchor and diffuse all the innovation that lies not just within the ‘walls’ of your organization but just beyond where your local people can see it, value it and bring it into the organisation as one of their contributions to innovation.

Permit people to ‘see’, to ‘engage’, to become ‘deeply involved’ then organizing around distributed innovation can lead to greater empowerment and sustaining your innovation engine and knowledge. Fortune will favour the connected mind not just the brave lonely few.

Are you building your distribution innovation model yet?