The Inovo Group Presents The Innovation Quarterly

Innovation Quarterly – Winter 2016

Fix Your Growth Gap, Embrace Uncertainty, Get Strategic

A New Year’s Greeting from Inovo

Once again we at Inovo enter a new year filled with anticipation. This past year saw many new relationships formed and the successful completion of some significant projects. We had our best ever Strategic Innovation Summit in September – the fifth and most inspiring one yet. Our work continues as we immerse ourselves in the front-end of innovation to research, develop and practice innovation in collaboration with our many wonderful clients.

All of us here are looking forward to another year working with the people and companies we have enjoyed so much and to the opportunity to meet those of you who are on your own innovation journey.

From all of us at Inovo,
May your innovation journey lead you and
your company to prosperity

Now for the Serious Stuff

As an innovator, you’re tasked with creating impactful innovation that will help secure your company’s future. “Impactful” may mean the innovations are disruptive, breakthrough or radical. It may mean they are core or adjacent. But are they strategic? In this issue of the IQ, get introduced to the concept of strategic innovation, read some articles on innovation topics we found interesting and learn about two books that are worth reading.


IN THIS ISSUE:

Fix your Growth Gap: Embrace Strategic Innovation

The concept of strategic innovation is a new way of looking at different types of innovation

In Case You Missed It (ICYMI)

Our favorite innovation content from the web

What We’re Reading

Superforecasting: The Art and Science of Prediction
Complications: A Surgeon’s Notes on an Imperfect Science

We’d love to hear what you think so jump into the conversation! Share your thoughts on our blog, or join the Advancing Strategic Innovation LinkedIn Group or drop us a note.  And remember we are here to assist you on your journey to …

Own the Unknown

Fix Your Growth Gap: Embrace Strategic Innovation

There are as many types of innovation that have been labeled over the past decade as there are varieties of breakfast cereal – sustaining, incremental, disruptive, radical, breakthrough, adjacent, core, emerging, etc. The surfeit of labels represents an earnest attempt to capture essential differences?
What are those essential distinctions?
The answer boils down to this: Every new innovation — indeed every new product, service or other offering — can be evaluated with respect to two fundamental dimensions:
1.       To what degree does the innovation change the world?
2.       To what degree does the innovation change the company?
Innovations that fall towards the “less change” end of these dimensions are tactical in nature. They are the must-have innovations that enable the company to compete in the near future.
Tactical innovations tend to cause innovators less grief. Even if the innovations present large and difficult technological and market challenges, they are “easy” for the company to agree to undertake. Once developed, they are also relatively easy to integrate into the existing business architecture.
But as many companies discover when analyzing their portfolio, the growth these must-have innovations bring falls short of strategic revenue and profit goals. This growth gap between the company’s strategic goals and what the tactical innovation portfolio can deliver is where things get difficult.
Innovations that fall towards the “more change” end of these dimensions are the ones that fill the growth gap. That’s because these innovations are strategic.
Strategic innovations are hard for a variety of reasons. There are external factors such as technology, market, industry, and customer demand. There are internal factors such as culture, leadership, business model, organization and operation.
But the underlying reason is that strategic innovations are not merely extensions of what you are doing today, but expansions into new, unknown, uncertain realms. Strategic innovation efforts invariably require a company to build new competencies, something most enterprises find uncomfortable. Yet honing and acquiring competencies in new areas is necessary if a company is to adapt to its changing environment. The risk if your company does not do this is great.
The inevitable choice is to embrace uncertainty, build new competencies, adapt and master strategic innovation. Following this path will lead you to the best disruptive, breakthrough, core, non-core, adjacent and any other types of company- and world-changing innovations you can imagine.

What are the competencies that are needed, and why are they hard to build? These questions will be answered in upcoming issues of the Innovation Quarterly and on our Innovate-Innovation blog. Stay tuned. And be ready to tackle the hard stuff.


In Case You Missed It

The innovation community is smart, vibrant and prolific. Here are some of our favorite recent insights and links to our commentary about the articles. More can be found on the LinkedIn Group Advancing Strategic Innovation.

1. More on Disruption from Deloitte
This is the first in an upcoming series by Deloitte on disruption patterns. Authors John Hagel III, John Seely Brown, Maggie Wooll, and Andrew de Maar provide a framework to show how companies get displaced via market condition factors and catalysts (their word) for disruption. If you’re into disruption theory, this is for you.
Source article at:  Patterns of disruption: Anticipating disruptive strategies in a world of unicorns, black swans, and exponentials

2. Disruption Indigestion…Time for a look in a new direction
Much has been written about Clay Christensen’s recent clarifications on Disruptive Innovation, and no piece is better than The Economist’s Schumpeter column.
Source article at: Disrupting Mr. Disruptor

3. Innovation Acceleration – Using the “Big Gun” for big problems
Policy commentator and podcaster Dan Carlin wants us to look with fresh eyes on the power of innovation to solve big problems.
Source article at: Common Sense 298 – Innovation Acceleration and Jab Defense

4. US Innovation Strategy is to “Win”
This new (updated) report from the government about US innovation strategy is worth reading to see how innovation is perceived by the government and the areas of emphasis policymakers believe will promote innovation in the future.
Source article at: Strategy for American Innovation: Executive Summary

5. How to Take a Moonshot
Stanford Technology Venture added another solid podcast in its Entrepreneurial Thought Leader Series. Here we have a panel discussion with three takes on pursuing innovation — from the academic, the inventor, and the investor.
Source article at: Entrepreneurial Thought Leaders Seminar – Christina Smolke, Steve Jurvetson, Astro Teller

 


What We’re Reading

Superforecasting: The Art and Science of Prediction
by Philip Tetlock and Dan Gardner
Read by Dustin Smith

“It’s very hard for professionals and executives to maintain their status if they can’t maintain a certain mystique about their judgment. If they lose that mystique about their judgment, that’s profoundly threatening… Level playing field forecasting tournaments are going to spread…To what extent (are they) going to destabilize who the big shots are within organizations? ~Philip Tetlockin conversation with Daniel Kahneman

Philip Tetlock, of “the average expert is roughly as accurate as a dart-throwing chimpanzee” fame and a Wharton professor, has conducted forecasting tournaments since 1985. This book explores the work some readers may already be familiar with.

Tetlock poses yes/no questions with a definite time limit (will Russia declare war on ISIS by Dec 1st, 2015?) and participants provide a baseline probability (e.g. 47%) supported by careful research. Throughout the tournament, participants update their estimates as new information emerges (troop movements, statements by Putin).

Tetlock keeps score (via Brier scoring, a measure of accuracy). That’s how he discovered experts to be no more reliable than 50/50.

Early on, he wondered if the best performers would regress to the mean. Was their success a fluke?

No. “Superforecasters” performed reliably better than pundits, experts, wisdom of the crowd, prediction markets and even intelligence analysts (who had access to classified information). Still more interesting, these Superforecasters, when clustered into small teams, performed even better than when working solo (individuals became 50% more accurate after joining a team).

Superforecasters have above-average intelligence but are not genius. They are humble, reflective, numerate, pragmatic and open-minded. They employ probabilistic thinking. They value diverse views and synthesize their own. When the facts change, so do their views. Teams of Superforecasters share information, complement each other’s strengths and critique each other’s logic.

Sounds great. So will we see corporate Superforecasting teams any time soon?

Tetlock thinks not, and I agree. Testing employees for Superforecaster traits is risky. Superforecasting’s predictive power wanes beyond one year and it’s output (externally valid truths) are a threat to corporate fiction and command-and-control structures. Collectively, there’s not enough payoff.

Instead, read this book if you want to understand how tournament winners think, to expose yourself to major developments in social research, to get better at problem solving, decision making and forecasting. Read it if you like breezy non-fiction punctuated with anecdotes. Read it to see if you have the chops to be a Superforecaster.

Or skip that and simply join Tetlock’s Good Judgment Project to find out for sure.

Complications: A Surgeon’s Notes on an Imperfect Science
by Atul Gawande
Read by Steve Schwartz

Reviewer’s note: What does a book about medical quality improvement have to do with innovation, you may be wondering. A lot, actually. Innovation, like medicine, means operating—no pun intended — in the realm of the unknown. Failures are to be expected, but the best practitioners account for their possibility and press on. In fact, that’s their secret.


At the recent Strategic Innovation Summit, the vice president of innovation for a well-known insurance company received a pointed question from another participant: “Is there really any risk in your industry? Isn’t it all just actuarial science?”

The executive answered with a grave look: “We crossed that line years ago. Now we underwrite risk well outside the realm of predictability.”

Those in the business of innovation may feel like saying, “Welcome to our world!” But we weren’t the first to arrive at that world either. The original denizens of the land of high-stakes and high-risk come from the field of medicine. And we get a helpful tour of this territory in “Complications” by Atul Gawande.

Trained at Harvard, Dr. Gawande is a practicing surgeon and a periodic columnist for The New Yorker. He paints a vivid picture of how unnerving life can be in the surgeon’s world as well as what we can learn and what top performers have in common.

Gawande says that operating beyond the edge of predictability instills fear in even the best. “If you’re not a little afraid when you operate, you’re bound to do a patient a grave disservice.” Many of the innovation leaders we meet share this fear, too. But they also exhibit another trait Gawande attributes to surgeons: confidence. The saying among surgeons is: “Sometimes wrong; never in doubt.” Many call this hubris, but Gawande see merit in it. Surgeons, as well as innovators, must operate in the realm of uncertainty, and being tentative only impedes performance.

We’ve all seen business leaders retreat from risk, and failing to develop a competency for innovation as a result. Gawande notes that for surgery, “Skill can be taught; tenacity cannot… The most important talent may be the talent for practice itself.”

It’s been said, tongue in cheek, that good judgment comes from experience, and experience comes from bad judgment. Having the fortitude to stomach this type of experience is what distinguishes serial innovators from dabblers.

In the end, Gawande sorts failures into three categories: ignorance, ineptitude and “necessary fallibility.” Medicine has used science to address ignorance and training to address ineptitude. The remainder, however, the “necessary fallibility,” just comes with the territory. The remedy here is to manage our expectations.

After centuries of science and training in the field of medicine, major misdiagnosis is still the cause of death in 40% of surgical fatalities. In the business world, which has an even shorter history of science and training to its credit, the failure rate for venture-backed startups exceeds 75%. What rate should we expect for corporate innovation? If we’re operating beyond the range of actuarial science, where the real competition is, then it too will be a large number. Innovation, like medicine, means operating in the realm of the unknown. Failures are to be expected, but the best practitioners press on. In fact, that’s their secret.