The Inovo Group Presents The Innovation Quarterly

Innovation Quarterly – Spring 2015

Navigating the Organization

Imagine spending months of exhaustive work creating, whittling and shaping opportunity concepts into concrete plans — only to have them sabotaged by “corporate antibodies,” those influencers within the company with their own agenda or who are unable to see the possibilities.

This happens all the time. In this issue of the Innovation Quarterly, we focus on navigating the organization — how to recognize where resistance will come from in order to anticipate it and how to distinguish between legitimate barriers, i.e. those you should respect, and those you should work to overcome.


IN THIS ISSUE:

The X- Axis Problem

Why “New-to-the-Company” Opportunities Often Fail (and what to do about it)

In Case You Missed It (ICYMI)

A selection of our favorite innovation content from the past three months

What We’re Reading

Brief reviews of “Seeing What Others Don’t” by Gary Klein and “Left Brain, Right Stuff” by Phil Rosenzweig

What are your thoughts? Share your feedback and opinions on our blog, in our Innovate Innovation Now LinkedIn Group or drop us a note.  And remember we are here to assist you on your journey to …

Own the Unknown

 

 

The X-Axis Problem: Why “New-to-the-Company” Opportunities often Fail (and what to do about it)

SI Canvas

 

Any innovation opportunity can be new to the company, new to the world, or some combination, and we can analyze opportunities along two key dimensions[1] [2]:

1. Y-axis – New to the World: A technology, offering, market or business model can range from well-known and accepted to totally new and different to the world.
2. X-axis – New to the Company: A technology, offering, market or business model can range from something the company already does to totally new and different for the company.

It may seem counter-intuitive to think that companies can come up with an offering that is new to the world but not new to the company.  In fact, this happens all the time.

Take for example a chemical/materials company that develops a new molecule or polymer with properties that are unavailable in any existing material. It is highly likely that this chemical/material company will manufacture and introduce the new material to existing and potential customers using the same organizational structures, processes and business models they use for all the other materials they sell.

Electric cars are another example. The technology may be disruptive, but traditional auto OEMs don’t need to change their behavior much in order to build and deliver these vehicles to customers. They can use the same distribution channels, the same brands, the same service and support models etc. as they do for any of their other vehicles (Tesla is the exception that proves the rule but they are hardly a traditional OEM). Even the development of new competencies (electric drives, energy storage, control technologies etc.) are done through partnership, supplier and development relationships that are well established and ‘comfortable’ for the OEM. The changes to the company itself are at the margins.

Moving up the Y-axis is relatively easy for companies if they do not need to change core structures and established behaviors. Where companies struggle is with opportunities that require the company to change its behavior in fundamental ways. We call this the X-axis problem.

Bringing a strategic innovation to fruition inevitably brings resistance from those “corporate antibodies[3]” mentioned earlier, and this resistance has meant the death of countless good opportunities (see Kelley and Littman[4]) and a corporate perspective (see Govindarajan & Trimble[5], O’Reilly & Tushman[6] for examples).

But for every good opportunity that a corporation kills, there are many more killed opportunities that deserve their fate. In addition, there are also many opportunities that should have been killed but aren’t. History is littered with companies introducing ‘innovations’ that, in hindsight, one asks ‘what were they thinking’? Think ‘New Coke’, the Ford 500, Pets.com, Windows Vista, and the Segway. One does not need to look far for failed ‘innovations’.

Resistance to a new opportunity from within is valuable; it can signal that something may be wrong with it. The key is not overcoming all resistance but for the innovation team to learn what the “mind of the company” is thinking. Uncovering the reasons and motivations that underlie support and resistance around an opportunity enable the innovation team to clearly see internal barriers — and to know which need to be overcome and which need to be respected.

How an innovation team “hears” these internal voices, and comes to understand the Mind of the Company is critical to the innovation process.

A new article by Brian Christian and Dustin Smith describes how to discover the Mind of the Company using “Wisdom of Crowds” techniques. Identifying the pockets of support and resistance throughout an organization is invaluable knowledge that the team then can use to shape the opportunity — and navigate and shape the organization — so that strategic innovations can successfully transition from idea to reality.

[1]   Details on the Strategic Innovation Canvas can be found in “Strategic Innovation: If it feels comfortable, you’re not doing it right”.
[2]   An opportunity consists of both the product or service offering and its associated business model. See “The Opportunity as Innovation Catalyst” for more information
[3]    The origin of the phrase “corporate antibodies” is relatively obscure. The earliest reference found so far is in The Venture Imperative written by Heidi Mason and Tim Rohner, published in May 2002.
[4]   Kelley, T., Littman, J.; The Ten Faces of Innovation; Crown Business; 2006
[5]   Govindarajan, V., Trimble, C. The Other Side of Innovation;  Harvard Business Review Press; 2010
[6]   O’Reilly, C., Tushman, M.; Winning Through Innovation; Harvard Business Review Press; 2002

 


 

 

In Case You Missed It

Innovation Community

 

The innovation community is smart, vibrant and prolific. The following is a small selection of recent, insightful items that we’ve curated for you.

1.       Here’s how the iPhone confounded business’s greatest disruption theorist by Joshua Gans in Quartz

Clayton Christensen’s theories on disruptive innovation have come under heavy scrutiny lately (see article by Jill Lepore in the June 23, 2014 New Yorker and subsequent brouhaha). Gans’ article makes some cogent arguments for why Christensen’s theory, in the most favorable interpretation, only explains part of the innovation story.

Gans points out that Christensen’s theory is one of “demand-side” disruption and that there is an entirely different mode of disruption, which can be called “supply-side” disruption, that Christensen missed.

In our opinion, what is still lacking, even in these supply-side theories, is the dynamic of new dimensions of performance and experience, such as the introduction of apps on a smartphone or the acceleration performance from an electric vehicle drive. These are novel and no performance or experience comparisons yet exist. This is where truly innovative companies focus their attention.

2.       An Anti-Creativity Checklist for 2015, a video posted on HBR by Youngme Moon

If your organization is like most, you experience pushback when pursuing new opportunities.

In her recent HBR video, “An Anti-Creativity Checklist” Youngme Moon, dean for strategy and innovation at Harvard Business School, has summarized some common symptoms companies exhibit when they pursue New-to-Company innovation. She calls out 11 behaviors you may have seen before. Can anyone claim not to have experienced at least some of these?

We follow up on Dr. Moon’s list with the thought that that the next step is to find the internal barriers that cause these behaviors. Some barriers you should push, but others you should respect. From the symptoms alone, though, it’s hard to tell which is which.

3.       Digital for All of Us from Boston Consulting Group: Seven Takeaways from their European Strategy Leadership Summit

The digitalization (not digitization) of business is rapidly proceeding. It is happening to both the offerings and operations of companies. This summary of a BCG conference presents the impact, which has implications for every type of business and every type of business process — including innovation.

From new tools to understand customer behaviors to independent discovery agents and software intelligences for automating design and even creativity, these tools will become ever more powerful and ubiquitous and fundamentally change how we do innovation. Pay special attention to the section about how “Computers are starting to learn … this is big.” We agree.

4.       How big companies can innovate: McKinsey & Company interviews Scott Cook of Intuit, Bill Gross of Idealab and Carl Bass of Autodesk

McKinsey weighs in on the need for large companies to pursue strategic innovation. All of us in the strategic innovation consulting industry hope that the three individuals interviewed are the new model for corporate leaders everywhere. Internal resistance is as large a barrier, if not larger, than external resistance to “the next big thing.”

5.       How to Exploit Your Startup’s Constraints: David Schonthal of Northwestern University Kellogg School of Management shares a familiar story reminding us that “Voice of the Customer” is not the “Mind of the Customer.”
A start-up pursing a device to reduce surgical infection rates needed to understand demand for its product. So the company founders went out and asked surgical staff, do you want this?

“Yes!” they said. But…

In his Kellogg Insight article, Schonthal reminds us that in the early stages of opportunity pursuit, “You go out to learn, not to validate.” The goal is to ask, “What assumption is the whole business hinging on?” and to put that to the test.

Rather than ask scripted questions to test adoption, the founders should simulate the device in action and observe users’ experience.

Is the new device wanted? “Yes, but…”

You also have to be willing and able to change habits and practices of your users, a much taller order.

 


 

 

What We’re Reading

Spring Books

Seeing What Others Don’t: The Remarkable Ways We Gain Insights
by Gary Klein
Read by Larry Schmitt

Gary Klein is a psychologist who became interested in how people gain insights – those “aha” moments when a sudden realization causes a change in perspective and consequent decisions and behavior. How people form insights, Klein claims, is both under studied and mis-studied, and he sets out to rectify the situation in this book, with mixed success.

Insights are important. They are a natural part of the human experience and the source of creativity and breakthroughs. They are how we develop new patterns that change the way we think, act, perceive, feel and desire. They cannot be forced or planned.

In Klein’s model of improving organizational performance, increasing insights is half of the equation (the other half is reducing errors). A well-formed, complete, accurate and actionable model of insight formation would clearly be of great benefit to both individuals and organizations.

As Klein was collecting stories about insights, he noticed that many, if not most, of the stories did not fit the prevailing model, established in 1926 through seminal work by Graham Wallace. Wallace outlined four stages of insight: preparation, incubation, illumination and validation.
Klein also noticed that experiments to study insight had used artificial environments in which the experimental design assumed Wallace’s four-stage model.
Using a strictly empirical methodology of collecting stories and finding patterns, Klein came up with a “Triple Path” model of insight.

  • Path 1: Creative desperation path – Escape an impasse by discarding flawed or weak anchoring assumptions
  • Path 2: Connection path – Spot an implications by putting things together to come up with a new anchoring assumption
  • Path 3: Contradiction path – Find an inconsistency, something doesn’t fit together, doesn’t make sense and form a new mental model that incorporates that inconsistency.

Once Klein introduces his model, he spends a lot of time explaining each of the paths using the various stories he has collected. Some of these are interesting, but it might have been more illuminating to get at the underlying mechanisms of insight. Many of the stories are seemingly trivial (e.g. he relates how his daughter had an insight about how to “game” her fantasy league so she could win). Yes, insights can be small and mundane or big and society-changing (e.g. Watson and Crick’s insight of the double helix), but isn’t the latter what we really want to understand?

Klein concludes that insights are mainly about challenging, overcoming and throwing away false, misleading or limiting assumptions. The true breakthroughs come when an unexpected shift in perspective realigns the assumptions we have been operating under. This happens, according to Klein when we
1.       Escape flawed beliefs
2.       Gain experience
3.       Take an active stance
4.       Utilize playful reasoning

Klein describes these activities through his stories, but he offers no specific recommendations about how to master them. He advocates cultivating an insight stance but, as he readily admits, more study is needed.

Despite its flaws, “Seeing What Others Don’t” is a valuable book for those who believe that insights are important and that there’s value in finding a way to increase them. The Triple Path model is an important contribution to insight research and provides a foundation to build on.

Left Brain, Right Stuff: How Leaders Make Winning Decisions
by Phil  Rosenzweig
Read by Vinny Kaimal

This is a book about decision-making, but where it stands apart from the many that have come before, is its attempt to tackle the realm of complex, strategic decisions.

Rosenzweig asserts that to make great strategic decisions — decisions that managers and marketers, leaders and policy makers (among others) often need to make — one should go beyond first order observations and pose second-order questions. Are we making a decision about something we cannot control or are we able to influence the outcome? And, if we don’t know whether it is something we can control or not, on which side should we err. Is it better to overestimate our control when in reality we have none (a Type I error)? Or, should we underestimate our control when in reality we have more influence that we think (a Type II error)? Are we seeking an absolute level of performance or is performance relative? And if relative, how are the payoffs for performance distributed — is it highly skewed, maybe even a winner takes all? And again, is it better to make a Type I or Type II error?

With plenty of relevant examples and entertaining stories, mostly from business, Rosenzweig provides fresh insights on many facets of making better decisions. For each facet, he posits the correct approach. For example, it is better to assume we can effect change (a Type I error), and it is better to assume relative performance and a highly skewed payoff, rather than the opposite. Or consider overconfidence, often the explanation when something turns out badly. Are we certain overconfidence is always bad, or are we inferring overconfidence based on the outcome of a decision? Are we even clear what we mean by overconfidence? Often over-precision (the tendency to be too certain that our judgement is correct), overestimation (the belief that we can perform at a level beyond what is objectively warranted), and over-placement (the belief that we can perform better than others) are lumped together as “overconfidence”. While almost all failure can be blamed on overconfidence, this is of little value- and determining the right level of confidence ex ante is difficult. What is needed is an understanding of the type of event we are making a decision about.  In fact, Rosenzweig suggests, for events where we can influence outcomes, and especially when performance is relative and the payoff highly skewed, a seemingly exaggerated level of confidence is often essential.

Rosenzweig’s conclusion is that it is preferable to err on the side of action. This is the “right stuff” he alludes to in the title, the ability to inspire, push boundaries, manage risk and take bold steps that, combined with understanding common decision errors and biases (left brain), enables leaders to make great decisions.