Are We Crushing Real Innovation?

Well, this morning I came across an article in the UK’s Guardian newspaper, entitled “America has become so anti-innovation – it’s economic suicide written by Ben Tarnoff, a writer on technology and politics, living in San Fransisco.

This article did disturb me, it triggered a number of validations in my own mind. Once you get past the opening rant about the infamous Juicero juicer, that has now been used as an illustration of how investors funded something that automates something that you can do faster by hand.

The article opens up the doors to questioning much that is going on under the Silicon Valley umbrella. The juicer got funding of $120m from a number of blue-chip VC’s but it was not this that actually disturbs me, it was this “ant-innovation” tag the writer was attaching to (North) America.

The article goes deeper in questioning where we are in our innovation thinking. We do have a real innovation growth dilemma that we can’t lay at the door of Silicon Valley alone, it is part of the Western world’s current sickness. It has lost that ability to take a positive risk in so much, ‘kicking the can down the road’ for others to resolve, be these societal, educational, health, infrastructural or institutional reforming and so much more. All really important innovation opportunities. Continue reading

Is all investment about the future?

Buy back questionI was reading an article by Doug Collins on the “three wishes for the innovation practitioner for 2015” where he points out “2014 was the year for share buybacks and dividends“.

An article from Bloomberg reports that companies in the Standard & Poor’s 500 Index are “poised to spend $914 billion on share buybacks and dividends this year, or about 95 percent of earnings.”

95% of earnings – Doug rightly says “wow” and offers a thoughtful set of observations

“Every organization that enjoys free cash flow makes a decision on where to allocate that resource. If the opportunity available to the organization meets or exceeds the hurdle rate—the desired, expected rate of return—then, in theory, they invest in that opportunity. If not, then no: the organization returns the cash to the investors. Of course, earnings come after investments the organization makes in innovation—research & development expenses, for example. Many do invest a lot in R&D”

He then remarks “And yet…..and yet” ….

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Seeking out and combining the higher-value impact points for innovation.

ImpactTwo years can feel like a long time. Exactly two years ago I wrote a post called “Making the appropriate impact” discussing my nine different impact points for innovation.

I wrote at the time we can have surprisingly strong influence on impact, as we are in a highly connected world. It is through our organizing and influencing abilities we can all partly determine our innovation future.

I suggested we have nine impact points to consider:

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Beyond the previous boundaries of innovation

Innovation is increasingly moving beyond the previous boundaries of just being left to each organizations scientists or marketing departments, those days are seemingly long gone. Today and in the future, innovation is about open, inclusive, full of exploration and harmonization to extract the best results.

We seem to have really grasped and recognized the combination-effect that comes from the myriad of different linkages that is propelling innovation activity and bringing increasing confidence within the boardroom.

According to a recent PwC report, optimism has dramatically been raised around innovation, so much so the vast majority within the survey of 1,757 c-suite or executives respondents believe their aggressive growth plans will be driven by organic growth (93%) and not by previous means of M&A activity. They are talking more radical and breakthrough innovation. BCG in its 2013 report on most innovative companies is equally far more bullish on innovation.

My only wish is this all this optimism is grounded in reality and recognition of what significant changes are required in structures, processes and supporting mechanisms that this increased innovation focus will really require.  They will have to address the existing organizations constraints as well as rework the emphasis away from the efficient and effectiveness focus that has become engrained. This will require a very dedicated focus on understanding innovation management and what it really means, to translate this organic ‘wish’ into reality over the next five years.

The good news is, we have seen innovation maturing

We are certainly seeing innovation has moved well beyond just products. It is exploring the value of combining or even separating services, changing value propositions on a more consistent basis and exploring new business models far more openly. All these approaches to innovation are challenging and demanding far more constant reorganization around changing the innovation activities to meet the ‘breaking’ opportunities.

One innovation struggle is around ‘rigidity’ within the organizations.

Innovation requires a more fluid, adaptive and agile environment. This will require some significant changes within the approaches within managing within these structures and this takes a significant and dedicated approach to achieve. The end result is changing the way people are managed and valued. There is a need to draw in, to engage, more open to diversity in opinion and thinking and increased emphasis on fluid teams tackling issues and challenges in unique ways, not through standard processes and approaches.

Research led or technology – based standing alone is not enough in pursuing greater functionality or breakthroughs, we need to cooperate with all the relevant people and partners that can bring the innovation idea or concept to fruition. The opening up to greater networks, exploring relationships and allowing them to deepen becomes vital. Allowing time for these to work and build the essential trust needed equally will take time.

The shifts in innovation activity, seeking simplification

We are also seeing increasingly the disruptive era of simplification, which captures far more of the imagination and where the increased movement of future wealth generating opportunities lie by meeting targeted customer need. These are not ‘layering’ on features that have been the approach of the past, this is stripping away and rapidly breaking these back down into targeted applications that do the job, we the consumer or client wants, often willing to pay a premium upon.

Complexity is also changing, taking out the pain

Complexity should not be about customers having to work out how to understand something; it is using the smart complexity that sits behind the solution to allow us to focus on what we need to achieve, to then help us significantly deliver on our required needs. Smarter searches, algorithms, designing your own options all are giving us the complexity we need. Simpler, interactive interfaces to do the job we wish to do, not forced to spend time learning and doing.

Exploring the effects of reverse innovation and lean approaches.

Reverse innovation, jugaad or frugal innovation is where there is  a huge potential – still largely untapped in developed countries offering new avenues to real targeted growth. What about the strong underlying movement in start-ups that is far more ‘needs related’ or serving ‘unmet needs’ through lean approaches and customer development techniques. These are so much better understood than the approaches in the past, of simply cruising along for opportunity with a vague business concept.

Sharpening the minds, changing the mindsets.

Everything has become so much sharper in why we have to focus our minds down, it is far more on what and where innovation can give us the next growth opportunity and that comes from all the diversity we can muster. Managing in the global innovation space is no different; we can get far more quickly at answers on a global basis than at any time in the past. We are learning to tap into this global knowledge in different ways, it needs a dedicated focus and understanding, to find the unique mix that suits your needs and knowledge accessing and translating and then we are closer to the solutions that have the global unlocking key.

We are using the ability to engage, to explore and exchange through a variety of social mediums, we can collect and interpret larger amounts of data than ever before.

As growth comes increasingly back on the agenda for most organizations, it will come far more from exploiting through this organic growth approach. Yet to achieve the ambitious growth targets that many organizations are seemingly talking about, there needs to be a radical overhaul of internal innovation understanding and structures.

Revisiting past practices

All of what has gone on previously needs to be revisited and in many cases reworked through new practices, new systems and new measures. Organizations are coming rapidly to the point of needing to be innovation re-engineered to make the sizeable changes they must achieve to ‘allow’ organic growth to deliver.

Innovation challenges much that is presently established within organizations, there is potential higher risks, significant changes required to be enacted within the organizations, with a whole raft of different competencies and capabilities to be learnt to extract the ‘promise and value’ from the innovation needed.

We are forced to look harder for attracting growth into our business and innovation can provide the force if there is the commitment backing the rhetoric of needing organic growth to be the primary driver of over the next five years.

Innovation needs positive translation in its management

I am sensing a really positive shift in innovation practice. It does seem to have gone up a notch or two in its maturity and adoption within our organizations in recent months. Can you feel the changes or are we still at the intent stage? Are organizations fully commitment to what shifting to an innovation emphasis will mean? Or are we only at a recognition stage?

There are significant sets of issues needed to be addressed to really allow innovation to drive growth. Organizations need to consider very radical shifts in approaching innovation and its management to gain any momentum, so intent can meet these organic growth ambitions as suggested? For me, in the next twelve months it will be the level of activity to  begin to re-equip organizations will determine if this is a reality or just C-level rhetoric, worried over the alternatives of low or no growth prospects but staying risk adverse.

PwC’s report on breakthrough innovation and growth

I’ve been reading through the PwC report “Breakthrough innovation and growth”, a survey of 1,757 C-suite and executive respondents, on their thoughts on innovation. The top line news is how companies are seeing innovation transforming their businesses and their need to take a more sophisticated approach to innovation, so as to achieve the growth plans they are setting for the next five years.

PwC are suggesting there is an innovation transformation under-way: “Companies are changing the way they innovate“. They further state that “innovation is becoming a competitive necessity, if it’s not, then executives need to be asking themselves what they could do to improve their innovation process.”

All I am providing here are my initial takeaways from a report I would recommend does provide really good value in working through. It seems innovation is becoming far more the central driver of the organization’s agenda than in the past, where geographical expansion along with mergers and acquisitions were more dominating.

It seems the future focus is far more on leveraging organic growth as organizations view the increasing dynamic and volatile business environment will  intensify and be even more risky but to achieve their growth objectives they will be needing to look beyond the traditional options they have explored so far to-date, through their innovation activity.

Firstly the transforming taking place around innovation

The five key transforming aspects with leading innovators taking a more advanced approach to innovation:

  1. Seventy nine per cent of the most innovative companies in their study have well-defined innovation strategies,
  2. Top innovators treat innovation just like any other business or management process that can be disciplined and successfully scaled.
  3. The leading companies are targeting a higher proportion of breakthrough and radical innovations, particularly around products, services, technology and business models.
  4. They are planning a wider range of innovation operating models.
  5. They collaborate more than their less innovative peers.

The factors setting the innovation leaders apart

Within the report findings, PwC are suggesting what clearly is setting the leaders apart can be summarized as they:

• innovate with purpose,
• have a well-defined innovation strategy,
• take a more formal and structured approach to innovation,
• are concentrating on a greater proportion of breakthrough and radical innovations,
• are planning a broader range of business model innovation,
• are exploring a wider range of innovation operating models,
• are planning to collaborate much more to generate a greater proportion of revenue from new products and services

The close of the report asks seven great key questions in the role executives do need to play in supporting  the innovation efforts.

  1. Are you paying enough attention to innovation? Innovation is quickly moving up the agenda for all businesses, becoming a competitive necessity and the main driver for growth. When was the last time that innovation was discussed at your management board?
  2. Do you have an innovation strategy? Innovation needs to be thought of as process which can be disciplined. A coherent innovation strategy aligns all elements of an organisation to its corporate goals. How do you plan to harness innovation to accelerate growth?
  3. Is your innovation portfolio right? Innovation portfolios are evolving, including a greater proportion of breakthrough, radical, and non-product innovation and a much broader range of areas to innovate. How well-balanced is your portfolio and where are you prioritising your innovation resources and investments?
  4. What is your innovation timespan? Companies too focused on the short-term never challenge existing thinking, while those too focused on the long-term overlook immediate delivery. A balanced perspective is needed. Are you creating the business of tomorrow while running the business of today?
  5. Is innovation an integral part of the executive and organisational mindset? Are operational efficiency and innovation metrics part of all management meetings?Are the resources, investments,processes, organisation and governance sufficient to provide the space for innovation to thrive?
  6. Do you know how to explore and find the really great innovations that drive unprecedented levels of growth? Is exploration something that people are incentivised to do?Do the innovation processes use leading practices to ensure high speed prototyping, exploration,and learning?
  7. Are you an innovation blocker or enabler? Executives too comfortable with the status-quo are one of the greatest barriers to greater innovation. Do you have the mechanisms in place to commercialize and scale your innovations? The last mile of turning innovations into significant revenue growth is often the hardest.

For me, this has been a report well worth working through, so thank you PwC for providing these valuable sets of insights. They offer encouraging news for innovation and its critical role within the current thinking within leading innovating organizations and the changing treatment that innovation is receiving.

This is certainly good news from any innovators perspective and a more than valuable report to put under the noses of the leaders of the organizations that are more within the ‘innovation laggard’ camp.

Those ‘ innovation laggards’ that are  failing to appreciate the changes  that are taking place within innovation practice and recognizing how they can leverage their future growth in broader and significantly different ways. Exploring different, more radical innovation practices, that have the potential for offering a real impact on their future growth potential, far more than the existing ones they are presently undertaking and supporting.

www.pwc.com/innovationsurvey © 2013 PwC. All rights reserved.