Last year I was invited to Warwick Business School to talk to a group of MBA and engineering students about that thorny topic of innovation. I thought, What could there possibly be left to say about innovation?
Innovation in all its guises is the most popular category of business books, by far, and thousands of websites offer advice to would-be innovators. Yet very few authors on the topic have actually innovated themselves!
Is innovation a weasel word?
A weasel word is a word or phrase aimed at creating an impression that something specific and meaningful has been said, when in fact only a vague or ambiguous claim has been communicated. Here is an example:
What is innovation? Perhaps more importantly, what is not innovation?
Today, in the era of SMAC (social, mobile, analytics and cloud) we seemingly live in a sea of innovation. Media sites such as TechCrunch and VentureBeat announce new innovations every few minutes. There are new rounds of venture funding for start-ups announced every day. Stories of creative people, doing amazing things, emerge each and every week. Is this innovation?
A decade ago I wrote a (rather long) white paper for CSC entitled What Innovation Is – How Companies are Developing Operating Systems for Innovation. It described the processes, culture and sources of innovation in a typical large enterprise. By using stories of innovation in practice, it focussed in on three main ideas:
- The innovator is a problem solver. Without a problem to solve there can be no innovation.
- The best problems to work on are often found among those who are most intimately engaged in advancing the state of the art.
- Set against a clearly defined challenge, innovation is the process by which firms create value from all sources of creativity and knowledge, from employees, often customers and always partners.
What academics such as Henry Chesbrough and Eric von Hippel call “Open Innovation” CSC now labels as Outside-In thinking, i.e. looking beyond the close-knit team who own a problem to a wider pool of thinking, capabilities and resources. Open source is a good example, but there are many others. And the word “outside” can be confusing. Employee crowdsourcing is far more practised than public open innovation, in fact.
A few years ago, for example, I helped a $2 billion business unit of a global organization to improve its cash flow. The unit’s Day Sales Outstanding (DSO) – an important financial measure – was three times industry norms. In simple terms, the gap between doing work for clients and actually getting paid was way too long. Reducing DSO has a major impact on free cash flow. The CFO of this business had tried, unsuccessfully, to make inroads into reducing DSO metrics on three separate occasions. There were incremental improvements, but not the step change required. I was brought in to try something new. My recommendation was to use a specific form of internal crowdsourcing that I now call “Process Echo.”
We designed a form to capture ideas. We set out a process by which the best ideas could be spotted and developed. And we instigated a pipeline by which selected ideas could be implemented in the business. Over an eight-week period we processed more than 180 ideas and more than 300 additional suggestions. About 2,300 people were invited to participate, selected because their role either directly or indirectly impacted cash flow operations. This included a raft of finance personnel, the community of customer project managers, together with sales and back office. More than 300 people emerged as active participants in what we called an “event,” generating more than 40,000 hits on the ideation portal which was set up both to capture ideas and to support the collaborative process among the teams involved.
The best ideas were sifted and sorted by an expert review team. Ideas were assigned to categories according to when they could be practically implemented (immediate, short term, longer term, never) and by what impact they would have on DSO if they were implemented. A portfolio of initiatives emerged from the crowd. The highest-impact ideas became new sponsored business projects. Within one year, DSO had been reduced by between 4 and 11 days (depending on product segment), representing a free cash flow improvement of between $64 million to $176 million per annum. These figures were audited by the unit’s finance office. The improvements were significant and results in later years exceeded this again.
There are many reasons why this crowdsourcing worked, but one thing stood out for me. From the get-go we did not ask for solution ideas at all, but for problems to solve.
Via the crowd, we asked employees to look around them and spot situations in their work, or that of their colleagues, which impacted day sales outsourcing (positively or negatively) – even if they had no idea what to do about it! These insights were aggregated and the changes necessary to improve the business became crystal clear. The “problem of finding problems” turned out to be more important than that of finding solutions.
As I stood up to speak at Warwick, I related this story to the MBA and engineering students. I wanted them to understand that if innovation meant anything at all (beyond the platitudes in many books on the subject) it surely had to mean finding the best problems to work on!
I then asked the students to look closely at their smartphones.
The ubiquitous Apple or Android smartphone is today’s symbol of extreme innovation. I wanted the students to think about whether they could locate the “innovation” inside their devices. I offered them a screwdriver to take the devices apart to see what they could find. No one took me up on that offer! So I showed them a slide listing all of the technologies that go into making up a smartphone and the apps that run on it. There was no mention of “innovation” on that slide!
Let’s call a spade a spade. Innovation is indeed often used as a weasel word. Customer value is created by sheer hard work, scientific advancement, engineering and good design. It is the engineers (a.k.a. the “geeks”) who solve the hard problems that result in valuable new innovations. And that’s not an easy message to deliver to a group of MBAs eager to contribute to the world and who perhaps studied the humanities before they decided they needed a job!
The hall went quiet. So I asked the engineers in the audience to try to explain to the business-oriented students sitting near them what they were doing when they were (in quotes) “innovating.” As I expected they found this hard to do.
If innovation is all about maths, science and engineering, can a business student innovate? Is there something common to all innovation, even in so-called “softer” fields such as management science, corporate strategy, human resources or government? I maintain that there is.
Let’s look back at that cash flow project again. It’s a good example because many of the students in the audience could relate to it more easily than the ins and outs of the engineering advances behind an iPhone 6. Cash flow is all about people, process and behavioural change. But that’s really beside the point. Innovation is possible in any field of endeavour. The top three ideas that emerged to help solve the cash flow problem solved a contradiction in the business.
A contradiction is a situation in which a desirable parameter of a new system is set against another undesirable parameter of a system. Increasing the former increases the latter.
Engineers solve contradictions all the time. Lithium batteries, for example, provide more power and longer life without increasing the size or weight of the cell. In fact, weight is also reduced! Look closely at any important innovation and you will find situations buried inside where contradictions have been recognized and resolved. (Politicians, by the way, are extremely poor at this skill. They don’t like fundamental solutions to the dilemmas of society, even if their policy advisers give them answers. Politicians prefer compromises that appeal to as many voters as possible. As a result, their solutions don’t often stick around for long.)
The cash flow ideation uncovered many contradictions in the business. In one situation, for example, the steps that project managers were taking to ensure that accurate invoices were always presented to customers (a common area of customer complaint) was, in fact, leading to bottlenecks downstream. The solution was to identity those activities that could be performed in parallel, and to reverse and decouple two critical steps in the process.
Having told this story to the students at Warwick, I went onto explain the various kinds of abstract contradictions and innovation patterns that exist and how they are not that different in business or engineering, even if the solutions are! My message to the business students was therefore that, as they move out into the workplace, if they wished to be seen as innovators (“business geeks”) they needed to become very good at finding the most important contradictions around them and to become the advocates and agents of change, to gather the multidisciplinary crowd to find the solutions.
What is innovation again?
Innovation is not the result of some mystical creativity, culture, magic or hope. It is not a random act or a clever compromise. Innovation is a carefully planned and deliberate intervention to break an important contradiction that is limiting progress towards some new level of capability. That’s how we got from the clunky mobile phones of the past to today’s elegant, powerful, smart devices. And it’s how most important problems in business are also solved.
Anyone can indeed be an innovator. Go find an important problem to work on. Here’s the formula:
If we could do X, without Y and Z, then we can also do P, Q, R and S!
A good list of questions / template for getting started is:
- Describe the problem or challenge at a high level.
- Is this a technical or a business problem? Explain.
- How did the problem or challenge emerge? What is the background to this idea or need?
- Do we know who owns the problem? Who might own the eventual solution?
- What type of innovation might be involved? (product, service, process, infrastructure, information systems, data, financial, organizational, cultural, etc.)
- Describe the details behind the problem in as much detail as you can. Where are the most complex areas?
- If this problem were solved, what would the client be able to do that they cannot do today? How would it advance their systems or capabilities?
- When is a solution actually needed? (Now, next month, next quarter, next year, future)
- Are solution ideas already on the table? Is anyone already working on this?
- Is any new technology involved? Explain.
- Roadblocks ahead? What might get in the way of providing or implementing a solution?
- If a solution were developed, when might benefits be felt after it was deployed? (immediately, near term, medium term, future potential)
- Make a guess: How would you describe the impact of the solution? (an improvement, replacement, addition to portfolio, disruption …)
- How will we know when the problem is solved? How will the client recognize the benefits?
- If a new innovation project were to be sponsored on this topic, what would you suggest its initial activities to be?
- Do we have an expert in this area who could help? Are you or your team the experts?
- How and when should the client be involved in a new project on this topic?
- What level of effort do you estimate for solving this problem? (Days, weeks, months, years)
- Does solving this problem have spin-off benefits in other areas?