Why and Where are Your Innovation System?

The purpose of a company’s innovation system is conceived in different ways. Some think growth is the purpose, others view development as the purpose, while still others make no distinction between growth and development. 

Some companies use their innovation system to renew existing core products and services. Others see its purpose as limited to developing new products and services. Some companies include merger and acquisitions efforts in their innovation system, others don’t. Some see innovating as marketing’s job, while others see it as a shared responsibility between R&D and market development.

While differences among companies regarding the purpose and scope of their innovation system can make comparisons and generalizations between them difficult, one perspective is to view the purpose of an innovation system as a means through which a company adapts itself to its surrounding environment. Without some type of adaptive capability, changes occurring in the business ecology in which customers, technologies and competitors interact go undetected until it is too late; mistakes are more probable, and sooner or later the company will find itself “behind the curve.”

Viewed as the ability of a company to sense, respond and adapt, a company’s innovation system must simultaneously enable responsiveness to external changes while furthering the host company’s interests.   

Think of an innovation system like a porch on a house. When you are on the porch you are neither completely inside nor completely outside. Similarly, as an adaptive capability, a company’s innovation system must necessarily be located in between. The system must stretch into the surrounding ecology if it is to have an accurate sense of what is going on, but also attach to the “proprietary” boundaries of the company’s house, real or imagined. Staying inside the boundaries of a company ignores the new realities enumerated by Henry Chesbrough in his book Open Innovation. Viewing a company’s innovation system as entirely outside a company’s boundaries will create overwhelming not-invented-here antibodies, killing most innovating efforts before they are carried to term. 

Anyone interested in building and improving such an adaptive capability–or innovation system–must align the system with two fundamental coordinates. One is the nature, character and relative flexibility of the host company’s business. David Teece, Chesbrough and others have described this and the importance of a company’s willingness to reconfigure its way of producing profitable value for customers. The other coordinate is the relative position the company chooses to take in its surrounding ecology.

In his thesis "Motors of Sustainable Innovation: Towards a theory of the dynamics of technological innovation systems" (2009), Roald A. A. Suurs, suggests that within their own external ecology, companies are either enactors or selectors of technologies, the former being more willing to develop whereas the latter are more ready to “buy” technology developed by another. A company willing to play an enactor role will have an innovation system with a very different profile than a company that sees itself as a selector. The enactor will place bets on certain technologies to invest in and develop themselves, whereas the selector will remain more agnostic to technology, looking rather to their own ability to quickly choose and commercialize what others have developed. 

One approach is not necessarily better or worse than the other. Some companies choose to do both. Being clear about what position the company chooses to take will make a significant difference in how its innovation system is designed, organized and resourced.       

This article was originally published in Innovating Perspectives in March 2011. For this and other back issues of our newsletter, please visit our website at innovationsthatwork.com or call  (415) 387-1270.

Innovations: Complexions, Complications or Complexes…and the wisdom to know the Difference

Much of the success of any innovation can be attributed to the way in which it is introduced.

A good introduction is based on the introducer's understanding of his or her “audience.”  Experienced innovators know that their success is contingent upon their knowledge of the surrounding ecology or system in which the innovation will be used and into which it will be introduced.

Kimberly-Clark Company learned this lesson the hard way many years ago with Avert^®. Ranked as one of the most innovative new products the year it was in test market by the NPD Group, Avert was a tissue-based product that could "prevent the spread of colds" by killing Herpes-2 virus in five seconds with a patented ascorbic acid treatment. Avert was quite naturally marketed as a facial tissue, that being with what Kimberly-Clark, the makers of Kleenex^® tissues, was most familiar. After all, Avert looked like a facial tissue, felt like a facial tissue, and was packaged like a facial tissue. Therefore it must be a facial tissue.

In hindsight, it quickly became apparent that although Avert^® had the appearance of a facial tissue, its primary benefit suggested that it belonged not in the paper products aisle, but in the cold remedy aisle. As a cold remedy, it may have lasted longer in the market.

The point is that every innovation requires some kind of introduction given its “newness.”   Every innovation needs to be integrated and assimilated into the existing system. Innovators who underestimate the introduction challenge are often left wondering why the world did not beat a path to the door of their elegant new solution. 

Not only must innovators be creative in conceiving and developing the innovation, they also have to anticipate the changes that will need to occur in the system into which the innovation will be introduced and integrated. Hence, a solid understanding of the system, its causes and effect, is absolutely necessary. Here is where wisdom and discernment, built upon as much analysis as possible, is essential.

Will your innovation affect only the surface or skin of the system?  Or will it need to go deeper into the system into which it is introduced? And if it goes deeper, will it be perceived as a complication or a fitting relief in modifying a burdensome complex that is already there?

Many innovations don't go much below the surface. Call them dermatological innovations. Their beauty is only skin-deep. These innovations may be designed for the sake of differentiation alone. Tier 1 and 2 auto suppliers have struggled for years with innovations for the sake of differentiation alone, living as they do under the tyranny of the “Big Three.” These innovations often end up not very sustainable because they are about the complexion of the systems into which they are introduced more than they affect the structure. Innovations like these are often easy come-easy go and end up churning a lot of the innovator's resources. A classic example of this innovation churn was the so-called cookie wars. So many new cookies forms were introduced, but few were supported in any sustainable manner. Dermatological innovations like this leave us with novelty that is only skin-deep.

Unlike complexion-level innovations (too much design and too little substance), some innovations suffer from the opposite: complication. These are the innovations that might succeed with the enthusiasts who have the time, passion and patience to deal with poor product design and the inability of the innovator to make the tough choices for the user.  Many consumer electronics innovations make their entrance as complications more than innovations as and when they sport more features than can be readily used and understood by end-users. My new smart phone is a case in point: full of capabilities only a small percentage of which I am likely to use.

The third type of innovation—those that sell themselves and approximate a truly elegant solution—offer a solution to a structural problem and, as such, take hold in a sustainable way by altering the system into which they are introduced. The proverbial iPod example is just such a case in point. Elegant design with known MP3 technology coupled with a well-executed iTunes web service is only part of the story. What Apple and Steve Jobs (a master introducer) also did was restructure the way we buy music.  Through iPod/iTunes, consumers were freed from the structural tyranny of having to buy music in albums. Now we could buy singles again, only this time we could get them delivered digitally. The success of Apple and Jobs with the iPod/iTunes was based on a solid understanding of the system into which the iPod/iTunes was introduced.

Where do we get wisdom to tell the difference between these different types of innovations?

Recently we were reminded of the difference between the corporate “pasture, free range, and wilderness.”* The reminder came in the form of an article by Joseph Meeker, Ph.D., brought to our attention by Stuart Brown. Meeker's article is titled Wisdom and Wilderness and was published, interestingly enough, in Landscape Magazine. 

While Meeker's comments have to do with the wisdom and wilderness in the natural world, what he has to say carries relevance for innovators in differentiating the existing markets (corporate pastures), from embryonic new markets (free range), and from the innovation wilderness.

Meeker writes, “Our minds and souls have roots in the untamed processes of nature. Preserving wilderness is human self-preservation. What better image of old age could we hope for than the prospect of wisdom contemplating wilderness? Few treasures are more valuable than these two forms of complex maturity. The rest of us need to study and learn from both in an effort to enrich our lives and our world. In the end, wilderness is nature's way of being wise, and wisdom is the mind's way of being natural.”

We can get more from fewer innovations when we better understand how the innovation fits (or not) in the users eco-system into which we envision it being introduced. This presumes at least some understanding and empathy for the structure of the system into which the innovation will be introduced and how it will or will not affect that system.

Wisdom comes from an awareness not just of one boundary (the border between the corporate pasture and the free range); it also requires an ability to tell the difference between what is wild and what is in that range of proximity that we call free range.

*The Maverick Way: Profiting from the Power of the Corporate Misfit (Cheverton, et. al. 2000).

This article was originally published in Innovating Perspectives in March 2007. For this and other back issues of our newsletter, please visit our website at innovationsthatwork.com or call (415) 460-1313.

Problem or Opportunity?

Is it a problem or an opportunity that you are working on? What you call it may matter more than we might think.

I used to be of the opinion that opportunities are really a more optimistic name for problems; that essentially problems and opportunities are the same. An optimist will call opportunity what a pessimist calls a problem. However, from my involvement in a variety of innovation efforts (each full of problems and opportunities) over the past 25 years, I am becoming less sure of the inherent similarities. The differences are more interesting—differences that may be more than semantic.  Opportunities and problems differ in logic, feel and form.

Just as questions beg answers, so problems logically lead one to search for solutions. There is an inexorable linguistic logic that appears to link answers to questions and solutions to problems. We cannot quite say the same for opportunities. The phrase “problem-solving” makes sense. The phrase “opportunity-_______” doesn’t have same cadence. We don't really “solve” opportunities. Opportunities seem to have a different (less direct and linear) logic all their own. Nor is it quite sufficient to say we discover opportunities. Discovery—as important as and necessary as that is—is not the end of the logic when it comes to opportunities. It is just the beginning. Development comes next. Think of Thomas Edison's 1% inspiration and 99% perspiration. [Could Edison have just as well said 1% opportunity-discovery and 99% problem-solving?] Suffice it to say that problems lead to solving, where as opportunities “emerge'”(a word I am not entirely satisfied with either!) and do not necessarily lead to a solution. Instead, they may lead to more learning, discovery activities, development or even problem identification and definition efforts. Opportunities have an inherently different logic.  

Opportunities also “feel” different. Many problem-solvers seek and find comfort from the problem-to-solution logic particularly when they are under the pressure of deadlines. Calling it a “problem” seems to help us know what to do and how to think next. It helps with the orientation and perspective. This is emotionally reassuring, not to mention enabling for the problem-solving process. Opportunities, however, do not necessarily bring with them the same clarity or immediate reassurance of what to do next. Should we first learn more, before we start developing an approach to exploiting the opportunity? Or should we jump right in, believing that by jumping in we can learn more, better and faster than watching from the sidelines or just dipping our toe into the water?  Opportunities feel less certain, but perhaps more exciting? However you might describe it, opportunities have a different feel. They are more contextual, perhaps.

Opportunities also have a different “form.” A problem—once understood and defined—tends to suggest one best solution, or at least the direction in which the solution is believed to reside. The way the problem is defined or formed often forecasts where the problem definers believe there may be a solution. This is one reason why it's appropriate and necessary to have those solving the problem also engaged in its definition. (There is danger here for the innovator. When a problem looks too much like the solution, we may not have anything novel, much less a sustainable solution at all.)

Opportunities, on the other hand, may have many different discovery and development paths. Unlike root cause analysis, for example, opportunities do not easily lend themselves to definition or analysis. They are more receptive to interpretation and direct experience—sometimes we call it 'immersion' (the allusion to baptism is probably intended, if not useful). We analyze and define problems, where as we discover, are attracted to, and interpret opportunities. Opportunities seem to have a different form.

So, it just may be worth asking ourselves if the "problem" we are working on is really an opportunity in disguise?  If so, we might approach it differently. As Piore and Lester make the case in their recent book Innovation: the Missing Dimension, we need to bring interpretive skills to the so-called "front ends" of our innovation efforts, leaving the necessary analytical skills for later.

Finally, there may be a practical reason for drawing a clearer line between problems and opportunities, especially for those of us interested in innovation. When a small group or individual moves from [what W.J.J. Gordon first described as] the “problem-as-given” to “the problem-as-understood,” there is a recognition of the opportunity in the problem; and with opportunity (more than with problems) comes freshness, novelty, hope and renewed energy to face whatever is demanded by this problem-opportunity set. Inventors and innovators alike are engaged with both problems and opportunities. But it is more from opportunities we seem to find the novelty, energy and hope to keep innovating against the odds.

This article was originally published in Innovating Perspectives in November 2005. For this and other back issues of our newsletter, please visit our website at innovationsthatwork.com or call (415) 460-1313.

Revisiting the “Core”

Over 20 years ago, shortly after I unfrocked myself as a Presbyterian minister, I found myself in the bowels of a large company’s R&D organization. An early curiosity to me at that time was how often the word “mission” came up. [I had naively assumed that term was reserved for ecclesiastical discussions!] That was the early 1980s when crafting and drafting mission statements and then framing and hanging them on the wall were commonplace.

Then, in the middle 1980s, “vision” became more fashionable. What we did with vision was almost indistinguishable from what we did with mission—crafting and drafting statements and framing them to hang on the walls. Then came “vision and values,” to be followed shortly thereafter by a term that actually had a little more staying power: “core.” Core business, core competency, core market, core customer, core technology, etc. to which we were to “refocus”(i.e., confine or restrict) our attention, resources and energy has held sway for several years now. The staying power of “core” bears witness to its relevance, if not its resilience. The fact that core has had a longer run in management jargon speaks to the term’s resonance with some fundamental organizational and managerial need. 

As with most words that have as long a run as “core” has had, it can produce some unfortunate side effects. While the meaning of core competencies, for example, remains a very useful concept; connotations of the term “core” can easily mask an organization’s autoimmune response to what could otherwise hold the seeds to the enterprise’s future growth.  The deficiency of leaving the term “core” to stand on its own is when it is used in an unqualified fashion, the core can become hard, even petrified; core competencies can turn into core rigidities. 

At last month’s gathering of companies involved in the recent innovation focal point study, we discovered a common thread. Many of these companies—suffering from a hardening of their cores—employ a “soft system” between the innovation/innovators’ sphere and that of the internal sponsor. The soft system in each of these companies “is comprised of a network of individuals who act individually and collectively as translators between the language/culture of the established business (the core) and the language/culture of innovation.” (See “Soft Systems for Hard Cores,” published by Vincent & Associates, Ltd. in 2003.) 

These translators advocate both control and growth goals of the corporation. They also act as innovation “midwives,” using a set of specific practices to resolve a set of fundamental challenges encountered in the nurture, development and integration of innovations. Innovation in corporations with well-established revenue streams has a slim chance without these translators and midwives.

When these translators think about the core, they see a seed for future growth rather than a hard and inedible part of the fruit. What enables these innovation midwives to view these otherwise hardened cores in this light is, I believe, their sixth sense for the organization’s continuing entrepreneurial vocation. At the risk of introducing but another term in a long line of words like vision, mission, etc., I would suggest we revisit the notion of vocation, simply based on the evidence of this sixth sense of these innovation midwives. 

Just as an individual can have a calling (whether understood in a secular or sacred manner), whether she or he fully understands what that calling is or not, so too a for-profit commercial enterprise can have a vocation as well, whether it recognizes it or not. “Vocation,” even more than mission, vision and/or purpose, can remind the successful company that society has implicitly or explicitly given it a role and responsibility that it must fulfill. Profitability is arguably the measure by which the company determines how well it is fulfilling its vocation—not to be confused with its vocation itself.

Peter Drucker said: “To know what a business is we have to start with its purpose. Its purpose must lie outside of the business itself (i.e., not “return to shareholders,” or “to make money,” etc.)   In fact, it must lie in society since a business enterprise is an organ of society.” (Management, page 61.) More recently, Jim Collins’ notion of what he called “the hedgehog concept” in his book Good-To-Great—the ability to “transcend the curse of competence”—is better described by the notion of vocation.

The dictionary defines vocation secularly as “a strong feeling of fitness for a particular [and often public]* career, function or occupation.” The word helps reframe the classic conflict within established companies seeking to innovate between the voice of growth through innovation and the voice of control through focus on the existing. The spirit of vocation can transform the conflict from an either/or to a both/and. Thinking of the organization’s vocation, helps us change the question from “whether” to invest to asking “where and how much do we invest in a new stream of revenue, and where and how much do we invest in extending the existing streams of revenue?”

This article was originally published in Innovating Perspectives in April 2003. For this and other back issues of our newsletter, please visit our website at innovationsthatwork.com or call (415) 460-1313.