BQF Innovation

I read an interesting post on the E-myth blog about UPS.  They found that they could save time and fuel by instructing drivers not to turn left.  It sounds crazy but by planning their routes to include only right turns they saved time spent waiting to turn left.

‘In 2004, after evaluating their CO2 emissions, UPS announced that its drivers would avoid making left turns. They calculated that the amount of time spent idling waiting to make a left turn would save millions of dollars in fuel costs every year. For example, in 2006 UPS trucks drove 2.5 billion miles, and with their unique package flow technology combined with their right-turn routes, they estimate saving 28,541,472 million miles, and three million gallons of fuel. ’

How many things are you doing in your organisation that seem natural and inuitive but need to be challenged?  What are the left turns you are taking that should be replaced?  Time to start some counter-intuitive thinking.

Paul Sloane

Last week I ran a session for GBPA corporate members where we discussed innovation metrics.  We reviewed the Boston Consulting Group 2007 research on the subject and the results of my innovation metrics web survey.  It was agreed that most organisations find it difficult to measure innovation in any satisfactory way.  The most common measurements are backward looking - e.g. % of revenue from products released in the last two years.  The BCG report recommends that you select a small number of metrics appropriate for your business and have some for inputs, process and outputs.  At the meeting we discussed which were the best metrics to use and here are some of our choices:

Input metrics:

• Number of ideas generated
• Resources allocated to innovation - people and budget

Process Metrics

• Average time from idea approval to implementation
• Number of ideas approved and number implemented
• Stage-gate pass rates
• Value of the innovation pipeline

Output metrics

• Number of new products or services launched
• Revenue from new products or services
• ROI on innovation spend
• Market Perception
• Number of new customers

We also found it useful to draw flow-chart diagrams of the innovation approval and pipeline processes and ask some searching questions about this.  Are we getting enough ideas coming in?  Is it taking too long for good ideas to be implemented?  Are we getting enough innovations out of the process?  Are our approval processes too complicated or too difficult?

It was agreed that everyone should have targets or objectives for innovation.  In collaborative ventures it is particularly important to agree goals, expectations and metrics for innovation at the outset.

There are no perfect measurements for innovation.  All the metrics are limited in value.  But that does not mean that you should not use them.  By choosing and applying a small number of metrics appropriate for your business you can add innovation to your balanced scorecard and give it the high level attention that it needs if you are to succeed.

Paul Sloane

So the greatest ever match between English clubs was settled by a penalty shoot out.  John Terry missed the chance to win the European Champions league for Chelsea and Manchester United went on to grab the trophy.   MU seize the title and the glory while Chelsea fans curse their luck.  Football fans everywhere enjoyed a fantastic contest but the question remains - is a penalty shoot-out the best way to resolve this kind of match?  Do we need some innovative thinking here?  If the teams are level after 120 minutes of football then what should we do?  If we brainstormed the issue then there are plenty of options we could come up with:

• The two teams could share the trophy - 6 months each
• A replay
• ???????? ????? ????????The team with fewer red and yellow cards could win
• The team with more shots on goal
• We could play on without the goalkeepers (and no offside rule) and see who scores first
• The team with more English players!

The penalty shoot-out is exciting but ultimately it is a lottery.  Someone has to miss or else we would be there all night.  I just wonder whether such an important prize should be decided in such a cruel and haphazard way? 

Paul Sloane

We know that innovation involves taking risks.  Yet it often seems that the safe option is to turn down the risk.  However, turning down a risk is also a risk - the risk of losing an opportunity.  Just to remind us of how big that risk is we have here a list of some of the worst decisions in business history.

They include Decca Records turning down the Beatles, Western Union rejecting the telephone, Mars confectionery missing out on ET, Henry Ford refusing to change the Model T and Digital Research missing the opportunity to provide the operating system for the IBM PC.  It is very easy for us with hindsight to scoff at the business leaders who made these decisions but  I am sure that the choices seemed rational at the time. 

Of course most bands are not the Beatles and many have to be rejected.  But it is easy to become too critical too soon.  How many of the ideas and proposals that we have rejected were missed opportunities?  When we look at the costs of a risky venture we need to factor in the cost of missing the opportunity too. 

Paul Sloane

The UK Department for Innovation, Universities and Skills (DIUS) has recently issued a White Paper on how the government plans to help the UK ‘excel at all types of innovation.’

You can download the press release, the executive summary or the full report (all 98 pages).  The role of the Department is ‘to champion innovation across the board, working with partners across and outside government.’  The Secretary of State, John Denham, has made a number of commitments and proposals in the White Paper.  These include:

• Supporting businesses in tapping into the demands of new markets in the UK by bringing forward five new ‘innovation platforms’ to co-ordinate Government support and funding.
• A new initiative to provide at least 1,000 ‘innovation vouchers’ every year by 2011, helping support and fund small and medium-sized businesses to work with a university, further education college or research organisation of their choice to develop a new product or service;
• Doubling the number of Knowledge Transfer Partnerships between businesses, universities and colleges.
• Piloting of a new Specialisation and Innovation Fund to boost the capacity of further education colleges to unlock workforce talent and to support businesses in raising innovation potential;
• Expanding the network of National Skills Academies with one academy for every major sector of the economy.
• Piloting a new Innovation Index in 2009 to measure UK innovation managed by the National Endowment for Science, Technology and the Arts (NESTA).
• Sponsoring new Partnerships for Innovation bringing together venture capital with universities, business and other local partners to jointly develop innovative solutions.
• Establishing an Innovation Research Centre in partnership with the Economic and Social Research Council (ESRC), NESTA and the TSB.
• Boosting the ability of small firms to exploit their intellectual property by training Business Link advisors in IP management by the summer of 2009.
• A new Annual Innovation Review to provide a comprehensive annual assessment of promoting innovation in the public and private sectors. The first of these will be published this autumn.

I met a member of the DIUS who told me that they are looking for feedback on these ideas so please take a look at them in detail and add your comments here or directly to the Department.  I will comment on some of the plans in due course.

Paul Sloane

Do you watch The Apprentice?  Candidates for the position of apprentice to Sir Alan Sugar are set business tasks in teams.  The losing team then has to face trial by ordeal by Sugar and his henchman and henchwoman.  Ultimately, with a great dramatic flourish and an accusatory pointed finger, Sir Alan announces, ‘You’re fired!’  And one more poor soul is sent on his or her way.  It is one of the few programmes about business on TV and the weekly elimination of a candidate makes for great drama.

However in many respects it is a poor guide to business.  One thing about it that bothers me is there has to be a losing team and a losing individual each week.  If one team makes a profit of £200 and the other team makes a loss of £200 then the loss-making team loses - simple as that.  But what if the loss-making team had a really creative idea but poor execution (as often happens the first time you try something)?  What if both teams had creative approaches? 

Innovative leaders do not punish failure.  They applaud honest attempts at new ventures that fail.  They treat each failure as a valuable learning experience.  They do not fire people for being entrepreneurial and launching a business that makes a loss on its first day.

I wrote an article on this subject titled Welcome Failure. 

Very often the best way to test an idea is not to analyze it but to try it. The organization that implements lots of ideas will most likely have many failures but the chances are, it will reap some mighty successes too. By trying numerous initiatives we improve our chances that one of them will be a star. As Tom Kelley of IDEO puts it, ‘Fail often to succeed sooner.’

Deborah Bull is the artistic Director at the Royal Opera House in London. She is keen to encourage small companies of artists to come out with mad ideas and to try them. She says, ‘We need to get away from the idea that everything has to be a hit at the box office and a hit with the critics. If everything we do succeeds, then we are failing, because it means we are not taking enough risks.’

Do you think that Sir Alan Sugar is a good role model as a business leader?  Is he really as brutal as that or is he just playing a part for better TV ratings? 

Paul Sloane 

According to this report from the BBC, coffee chain giant Starbucks is hoping its loyal customers may be able to brew up the bright ideas to help turn around its struggling fortunes. The company recently launched a website offering its US customers the chance to pitch ideas for how the firm can improve its stores and operations. Despite some scepticism from critics, the MyStarbucksIdea.com website has now been flooded with thousands of ideas. These range from free birthday coffees to express tills for quick orders.

The site is mystarbucksidea.com.  You can submit ideas, vote, discuss and see progress on approved ideas.  There is a list of the most popular ideas and the most recent.

How about a similar site for your customers’ ideas?

Paul Sloane

In this entertaining and challenging talk Sir Kenneth Robinson argues that creativity is as important as literacy and that our education system is failing in this regard.  He points out the many ways our schools fail to recognize — much less cultivate — the talents of many brilliant people. “We are educating people out of their creativity,” Robinson says.  “Children are not frightened to be wrong.  By the time they become adults they have lost that capacity.”

Try this little test:

 http://www.dothetest.co.uk/

It has some interesting lessons for innovation and thinking.

 Paul Sloane

Most business leaders plan modest incremental growth each year. They set expectations that they are confident can be achieved.  This way everyone can get a pat on the back when the plan is reached.  Growth in revenue in line with the market at 5% and growth in profits of 6% is the sort of thing.  Many directors would be delighted with this sort of result.    The trouble with this approach is that it reinforces incrementalism.  The easiest way to get 5% growth is by pumping up the existing products or services.  We can add some line extensions.  The easiest way to wring out some extra profit is to improve the efficiency of the current model or to squeeze down on our suppliers.  There is no incentive here to look for big opportunities, to find entirely new sources of revenue, to conceive new business models. The second problem is that companies, just like children, tend to conform to the expectations that are set for them.  If 5% growth is considered a good result and 7% is considered a demanding ‘stretch’ target then few in company will believe that anything greater than 7% is possible.  Just like children who are constrained by their parents’ lack of belief, the people in the business match their collective norms. 

Outstanding companies set outstanding expectations.  Businesses that want to break out of the pack demand more of themselves.  This is what GE Capital says about expectations, ‘It is expected that we will grow our earnings by 20% per year or more.  When you have objectives that are outlandish it forces you to think differently about your opportunities. If one guy has a 10% target and another has a 20% target the second guy is going to do different things.’

Drastic expectations reinforce the innovation goals.  If people realise that just doing what everyone else in the market is doing is not enough then they will respond.  Average expectations about the company encourage people to think and act averagely.  Drastic expectations encourage people to think innovatively and act like entrepreneurs. 

 Paul Sloane