BQF Innovation

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

There is a wide choice of social networking sites for business people.  I use Linkedin, Facebook, Plaxo and Ecademy but I find it hard keeping up with them all and I am sure that I am not getting best use out of them.  Maybe they just demand too much time.  Linkedin has been useful - especially for getting in touch with former colleagues.  Ecademy has helped me get some business.  Which do you use and do they help you get ideas, contacts or new business?

Here is an interesting comparison of Linkedin versus Facebook.  Linkedin is focused on business individuals whereas Facebook has grown out of a student group environment. ComputerWorld put both sites to the test with six different business tasks and it compares how well they do.  The results might surprise you.

Paul Sloane

For the past 7 years the European Commission has compiled an assessment of the innovation competitiveness of all the EU states and some other countries as comparisons.  The 2007 report has recently been published and you can read the full report.  The key factors that are used to compare the performance of countries are as follows:

Innovation drivers measure the structural conditions required for innovation potential, Knowledge creation measures the investments in R&D activities,  Innovation & entrepreneurship measures the efforts towards innovation at the firm level,  Applications measures the performance expressed in terms of labour and business activities and their value added in innovative sectors, and Intellectual property measures the achieved results in terms of successful know-how.

There are some 38 countries listed.  Here are the top 20:

1. Sweden
2. Switzerland
3. Finland
4. Israel
5. Denmark
6. Japan
7. Germany
8. UK
9. USA
10. Iceland
11. Ireland
12. Austria
13. Netherlands
14. France
15. Belgium
16. (EU Average)
17. Canada
18. Estonia
19. Australia
20. Norway

The report states that  the innovation gap between the EU and its two main competitors, the US and Japan, has been falling but remains significant. The US keeps its lead in 11 out of 15 indicators and Japan keeps its lead in 12 out of 14 such indicators.  A comparison over time shows that the EU is experiencing an increasing lead over the US in Science and Engineering graduates, employment in medium-high and high-tech manufacturing and Community trademarks, and a stable lead in Community designs. The EU is experiencing a declining gap with the US in broadband penetration, early-stage venture capital, ICT expenditures and triad patents. But the gap with the US is increasing in public R&D expenditures and high-tech exports.

The report is rather dry and it involves some estimates that can be challenged.  It would be better if China, India, Brazil and some other countries were included but their data is not available.  However, it is the best comparison we have and contains some very revealing data.

Paul Sloane

Here is an interesting article on collaborative innovation in the Exchange Morning Post.

It draws on the collaborative experiences of Advanced Micro Devices and IBM, Renault and Nissan, Nike, Reuters and others.  Key lessons are that success takes time and depends strongly on a shared strategic outlook and a deep level of trust.

Paul Sloane

Here is a marvellous little video clip that I got from Frank Calberg.  See what you think.

Paul Sloane

There is an interesting report on leadership and innovation on the McKinsey site.

Based on a recent survey they say that most senior executives are dissatisfied with their  ability to stimulate innovation.  They recommend a that a disciplined focus on three people-management fundamentals may produce the building blocks of an innovative organization.  A first step is to formally integrate innovation into the strategic-management agenda of senior leaders to an extent that few companies have done so far. In this way, innovation can be not only encouraged but also managed, tracked, and measured as a core element in a company’s growth aspirations.  Second, executives can make better use of existing (and often untapped) talent for innovation, without implementing disruptive change programs, by creating the conditions that allow dynamic innovation networks to emerge and flourish.  Finally, they can take explicit steps to foster an innovation culture based on trust among employees.  In such a culture, people understand that their ideas are valued, trust that it is safe to express those ideas, and oversee risk collectively, together with their managers.  Such an environment can be more effective than monetary incentives in sustaining innovation. 

The sample of 600 managers and professionals indicated that the top two motivators of behavior to promote innovation are strong leaders who encourage and protect it and top executives who spend their time actively managing and driving it.  Indeed, senior executives believe that paying lip service to innovation but doing nothing about it is the most common way they inhibit it.  The report says leaders should:

1. Define the kind of innovation that drives growth and helps meet strategic objectives.

   
2. Add innovation to the formal agenda at regular leadership meetings.

3. Set performance metrics and targets for innovation.

4.  Build innovation netwworks

5.  Develop a culture of trust

Paul Sloane

If you are looking for product or process innovations then you could take inspiration from the middle row of your computer keyboard. The letters A S D represent add, subtract and differentiate.  What can you add to your product, what can you take away and how can you differentiate? 

Let’s look at how Ryanair used this approach to take on the established airlines.Michael O’Leary, the founder of Ryanair looked at the whole business process of passenger flights and built a new model.  He started by subtracting all the frills that meant extra cost.  He subtracted:

 Travel agents – you book direct over the Internet so the middlemen and their costs are cut out.

 Tickets – you show your passport and quote your reference number.  Subtracting tickets saves costs.

     

 Allocated seating – you choose a seat when you get on the plane – just like on a train or bus.

 Free drinks and snacks.  If you want a drink you have to buy it.

Customer care – Ryanair has one-tenth the number of customer care attendants per passenger mile compared to BA.  If you have a complaint the answer is generally – ‘hard luck but what did you expect with such a cheap flight?’

Then O’Leary added some new ideas with the aiming of supplementing revenues:

·        Advertising on the outside of aeroplanes

·        Ancillary deals with hotels, car hire and bus companies whose tickets are sold on Ryanair flights

Finally Ryanair differentiated its approach with:

·        Smaller regional airports who offered low prices to get the traffic volume that Ryanair could bring.

·        Cheap in-house marketing featuring controversial advertising (one ad featured the pope) and outrageous PR stunts.

·        Buying aircraft cheaply – by choosing times such as just after 9/11 when demand and prices were very low.

What can you take away from your current business process in order to save cost and simplify operations?  Can you unbundle your product into separate components?  Can you strip out costs or processes that not all customers want?   Can you bypass a middleman on the route to your customer – as Direct Line, Amazon and Ryanair did?  Egg and First Direct offered on-line banking and made it cost effective by cutting out all the branches that burden the traditional banks

What can you add to increase the value and attractiveness of your proposition?  Is there an equivalent to a little bag of salt added to a packet of crisps that would make your product more tasty for consumers?  Linda Brava is the Finnish classical violinist who appeared on Baywatch and in Playboy.  By adding glamour to violin virtuosity she has created a unique brand.

What can you do to differentiate your approach?  If you are competing with strong well-established market leaders then a me too approach will not get you far.  Coca-Cola and Pepsi dominate the soft drinks market.  When Virgin competed head on with Virgin Cola they struggled.  The successful new entrants have used lateral approaches and differentiated themselves – Snapple with fruit drinks, Tango with black cans and in your face advertising and Red Bull with a stimulant mixer.

Sometimes you can combine all three techniques – Mercedes added Swatch designers to create the most differentiated and unusual town vehicle – the Smart car.  They subtracted something that had previously been considered non-negotiable - half the length of an average car.  Anita Roddick made the Body Shop a great success by cutting out the expensive packaging on traditional toiletries and using plain plastic bottles – she added a new appeal based on an environmentally friendly approach.

Nest time you are faced with the challenge of how to refresh your product offering think mathematics.  The way to multiply your sales is by addition, subtraction and differentiation.

Paul Sloane

It is that time of year when we wipe the slate clean and set ourselves new resolutions and goals.  I expect that like me you have some personal resolutions.  Have you turned them into targets that are measurable and given yourself dates by when you want them done?  Whether it is losing weight, getting fit, saving for your pension, writing a book or learning a language you need to turn vague resolutions into hard metrics.

When it comes innovation the same approach applies.  It is no good just planning to be more innovative - either for yourself or your organisation.  You need to set targets.  Here are some typical corporate style goals:

1. Implement a new idea generation and evaluation scheme by 15 April 2008.
2. Run creativity and innovation workshops for 50 staff in the first quarter.
3. Have everyone allocate at least one day per month to innovation initiaitives.
4. Select 10 promising ideas each month for trial.
5. Implement 10 new products and 6 new services this year with at least 60% success rate.
6. Improve the ROI on our innovation projects by 30%.
7. Reduce the time from evaluation to implementation for new products to under 5 months on average.
8. Over 30% of this year’s innovations to have started outside the organisation.

Choose a small number of targets that suit your environment and then articulate them clearly.  Get buy-in from senior executives.  Translate the targets into objectives for individuals.  Measure progress.  Reward and celebrate success.

Let me know what targets you set and how you get on.  I will be happy to advise and to join in the celebrations!

Have a great and innovative year in 2008! 

Paul Sloane

In

In this article in Businessweek, Jeananne Rae analyses what makes leaders in service innovation successful.  Her consultancy carried out detailed studies of 12 leading US service companies to see what common patterns emerged.  There is a detailed report.

‘Key findings of the report included the Internet emerging as an important distribution channel in almost every case. The services era has ushered in service availability whenever and wherever you like. Although the majority of these companies were not dot-coms per se, investments in cultivating online business were the norm for this group of innovators.

In a larger context, information technology has become the new factory for service businesses in that automation helps to “productize” (i.e., make more repeatable) innovative concepts. IT also helps scale services. We saw relatively small investments in the development of IT engines beget enormous returns because of the potential to add new customers and transactions globally at very low cost.

One other key finding is a pattern in which the customer replaces the direct competitor as the dominant reference point for strategy and innovation. There are three underlying reasons for this shift.

First, competition is coming from new and unexpected sources, so disruption from someplace—and not necessarily a place you’d expect—is a given.

Second, customers are more sophisticated and demanding than ever before. Expectations are regularly informed by outside benchmarks such as how fast you can order tickets online or how easy your iPod is to use, not necessarily accepted industry standards. (For example, as financial-services firms have introduced Web services, they’ve realized their customers demand a level of service set by Amazon (AMZN) and Google (GOOG)—not by their industry peers.)

Finally, the proliferation of systems allows for information-driven business models that can provide a user with much more control, and control is a big deal these days given our hectic lifestyles. For the businesses we studied, the main source of insight in developing control points was referencing the needs of end users, not the competition’s offer. ‘

Paul Sloane