Front End of Innovation 2014 – May 13 – 15, Boston
Industrial Research Institute Annual Meeting 2014 – May 19 – 22, Boston
These two conferences, held this year on subsequent weeks in Boston, represent a good opportunity to assess the current state of the art in innovation thinking and practice. The two conferences are different in their structure, approach, content and attendance. The FEI conference has been around since the early 2000’s (this is the 13th annual conference) and attracts providers and practitioners from a wide variety of companies and professions.
The attendees of FEI tend to be more junior than those at FEI and the keynotes are more ‘big’ names, not necessarily in the innovation ‘profession’. For example, Dan Pink, the author of ‘Drive’ was a keynote at FEI. His talk about motivation was peripherally related to innovation and was interesting – if you had not read the book or heard the same talk numerous times before. The ‘vibe’ at FEI is one of people new to the profession learning the ropes. You can imagine a ‘typical’ attendee at FEI as someone just hired into the innovation team at a large corporation being sent by their manager to go to FEI to ‘get up to speed’ on the latest thinking.
The IRI has been around for 76 years and this was their 76th annual meeting. It shows. While the subject and focus of IRI and its annual conference is ostensibly about R&D (the conference was called R&D and MVP) the real driver of conversation at the conference is innovation with a strong dose of technology. In contrast to FEI, the keynotes were, for the most part, by people who are leading the innovation efforts in their companies. The discussions were deep and substantive and the attendees are experienced and well beyond the ‘innovation 101’ stage. All together, the two conferences covered the spectrum of the state-of-the-art in innovation thinking and practice today.
It is useful to take a step back from the specific keynotes, presentations, workshops and personal interactions to identify common themes, weak signals and trends in innovation. Here are some observations from spending time at both of these conferences, listening to all the keynotes, attending the seminars and workshops and having numerous interactions with a variety of individuals involved in the practice of innovation.
- Pace of Change: The constant and increasing pace of change in technology, design, demand, society etc. is widely recognized. This is causing tremendous transformations and creating enormous opportunities. There is a lot of discussion on themes like ‘a new era’ and ‘convergence’ that are being driven by technology. Everyone agrees. The question is what to do about it.
- The big themes and drivers of transformation are widely known, shared and discussed. It is no longer novel to say something like the ‘Internet of Things will transform everything’.
- Movements like the rapidly evolving ‘Open Innovation’ trend are, in part a reaction to this pace of change. No one company can know all it needs to know, or solve all it needs to solve, so they are increasingly tapping the network to get the knowledge and the creative power they need.
- Since the primary recognized drivers of change is technology, people and companies are looking to technology to give them the edge and provide the impetus to growth. Technology is becoming more and more important to companies, even those who we would not have previously considered technology companies.
What does this mean for innovation? It is not enough to just acknowledge and parrot the big trends that everyone knows, organizations really need to be able to find the weak signals and indicators of change that are not obvious but that can provide real, proprietary value. Emphasizing technology can be a key differentiator but the technology in and of itself is not sufficient to drive innovation.
- Sustaining vs. Strategic opportunities: The difference between these two types of opportunities is receiving a lot of attention and discussion. There are many names given to these two types of opportunities – ‘core’ and ‘growth’, ‘incremental’ and ‘disruptive’ are commonly used terms. A more accurate terminology is ‘sustaining opportunities’ and ‘strategic opportunities’. The fact that there exist two different types was mentioned by people from GM, GE, Tribune, Cisco, Pratt & Whitney, Pepsico, and others. There is no consensus on what the dividing line is between them. There is acknowledgement, however, that they need to be addressed differently within an organization. This recognition is resulting in the following.
- Establishment of two different organizations within one company. The ‘business’ organization focused on the sustaining (e.g. core) and the ‘transformation’ organization focused on strategic (e.g. growth). Both organizations have innovation functions but they are organized, funded, operated and overseen quite differently. The importance of having the strategic organization ‘separate yet integrated’ was mentioned many times. It is interesting to note that in very large organizations, a business unit itself can have its own strategic organization. They often contain ‘incubators’ and can be responsible for not just the front-end but, as in the case of Pepsico, taking something all the way to market and creating a new business.
- Adoption of test & learn processes distinct from stage-gate. This is rapidly becoming the ‘best practice’ method for realizing strategic opportunities. Some form of this was mentioned in every talk or presentation that discussed radically new offerings or business models.
- Business model innovation is becoming as important as technology innovation. This is related to the first two bullets but deserves special mention since it is the elements of B-model innovation that are typically emphasized and focused on (at least as much as the technology or solution) in the test and learn process.
What does this mean for innovation? A company needs to organize and positioned itself properly if it is to do both sustaining and strategic innovation. It needs the right framework and processes, tools and methods for doing what are two, very different activities requiring different types of people and approaches for success. Balancing the needs of these two, often conflicting, organizations under one roof is an ‘unsolved’ problem. Many companies are experimenting with the right approach to do this but there is no ‘best practice’ yet.
- Data-based Tools for the Front-End: There are emerging a number of data-based tools to assist with the innovation process. The desire for data driven decisions and better metrics for innovation efforts is creating a market for data analysis tools. These are different than the idea management systems and open innovation systems of Imaginatik, Hype, Spigit etc. that have been so popular in the past decade. These new data-driven analysis tools accommodate the qualitative assessments necessary in the front-end and turn these into quantitative ranges and estimates of certainty. Three of these new types of tools were discussed in-depth at IRI. The interesting thing about all three of these software systems is that they are being used by VC’s, Hedge Funds, Private Equity etc. to assess investment opportunities. This was touted by all three firms and indicates a degree of verisimilitude that at least satisfies the investment community.
- Research Quotient (RQ) – Anna Marie Know of Washington Univ. has come up with what she claims is a way of determining if a company has the right level of R&D spend and is using this spend correctly
- Growth Science has a business model simulation system and process to let you determine the probability of success for a new innovation (or business) based on both publically available information (20%) and internal information (80%) extracted from interviews, pitch sheet analysis etc.
- Tempus Resource by Prosymmetry and used by Cameron & Associates to value an innovation opportunity (and portfolio) using options value of investments and ranges of estimated value outcomes.
What does this mean for innovation? Software Tools to support front-end analysis and decision making tools will become more and more prevalent and valuable. The emerging use of AI has the potential of removing human bias, making use of more comprehensive data and structuring innovation analysis and decision making in a more rational manner. The key will be the ability of software support system to deal with unstructured, qualitative, incomplete and ambiguous data, but this is exactly what emergent AI systems are showing promise doing.
- Focus on people: There is a common and strong emphasis on the critical role of culture, talent, skills, mindset etc. – the people part of innovation – with a lot of discussion on leadership, culture, the personality and environment necessary to foster innovation. Everything from creating humor in the workplace to inspire creativity to how to foster interactions among a global team to incentives and motivations of both new employees and leadership. There were a number of mentions of the ‘frozen middle’ management layer and how this needs to be addressed. Some key topics are:
- Systems for identifying people with the right skills, personality, mindset
- The right team composition, diversity of perspective and approach
- Corporate culture, what it is, how to create it, or, at least, how to deal with what it is.
- The role and behavior of leadership
- Organizational structures that facilitate innovative behaviors
- How to connect people and foster deep interaction
What does this mean for innovation? Regardless of any process, methods or tools employed, regardless of any organizational structure or innovation strategy, the success or failure of any innovation initiative is highly people dependent. An innovation team operates, communicates and interacts with itself, with the external community and with the larger organization. The personality, skills, experience, mindset and capabilities of both individuals and the team is of critical importance to success. New paradigms such as the concept of a ‘purpose built team’ that is more like the team brought together to produce a movie is one metaphor that is being discussed and experimented with.
- Opportunity Pursuit vs. Discovery: Opportunity discovery was not a topic of discussion at either conference in the keynotes or the working sessions. Virtually every presentation started from the premise that an opportunity has been identified and the problem is how to bring it to fruition. There is a dichotomy between the common feeling that brainstorming is insufficient or broken and the ubiquitous use of idea generation techniques like brainstorming. Whether or not ‘good ideas’ are still an issue, the focus is definitely on how to move identified opportunities forward, not on how to come up with good ideas. There could be several reasons for this.
- It is a solved problem. New ideas are not the issue any more. Companies do not have an issue identifying a good opportunity (highly unlikely)
- The current attention on other areas (e.g. test and learn) is drowning out attention on this issue
- We’ve been talking about this for so long that people are ‘burned out’ discussing it and are living with what they’ve got.
What does this mean for innovation? It is clear from numerous examples and experience that opportunity discovery is not a solved problem. Part of the issue may be confusion around the term ‘idea’. There is still a lot of talk about ‘coming up with ideas’, ‘testing ideas’, ‘managing ideas’, ‘executing ideas’ when perhaps a better term to use is ‘opportunity’. Many companies are swamped with ideas but lack meaningful opportunities. Once the discussion is about opportunities, not ideas, then opportunity discovery becomes very relevant.