Increasing Signal, Decreasing Noise

Signal-to-noise ratio is the electrical engineering concept that describes the strength and clarity of a signal as a function of the signal’s power level divided by the strength of the noise. Noise, or static, can be so great as to mask or corrupt the signal. Measuring the signal-to-noise ratio requires the selection of a representative or reference signal. With these reference signals, average signal-to-noise ratios are measured and normalized with the goal typically being to achieve a cleaner signal by filtering out the noise and thus allowing the signal to stand out better (Wikipedia).

Signal-to-noise ratio is an apt metaphor for what we are trying to do in an innovation project, both early and late in the process. When an innovator is in the early exploratory challenge, the goal is to detect the presence or potential of a new signal where before most found only noise. In the invention challenge, the goal is to clarify just what the reference “signal” (the new value proposition) is, and get it to stand out. In the reduce-to-practice challenge the goal is to consistently produce signal-to-noise ratio profitably enough to attract investors to take the next steps. And in the introduction and integration challenges the innovator must find the right channels to attract customers to the signal without frightening them.

Each innovation likely has its own native and optimal reference signal.  Like a sculptor chisels out the shape he/she envisions in a hunk of marble, so the innovator carves out from the noise of surrounding context a signal that, if successful, resonates greater value and meaning with the end-user than what the user had before.

This is true for all innovators, whether entrepreneur or intrapreneur, although intraprenuers arguably have another layer of noise to deal with—the prevailing business models and organizational culture of the host organization.

An innovation can establish a whole new set of signals in forging new connections and communications between the innovating company and end-user. Innovations not only create new value. They become new signals themselves. In fact, one of the more gratifying experiences of an inventor and/or innovator is to have their innovation accepted and “at home.” When it happens it means that the innovator heard, felt or saw something (directly from the user, indirectly from the context or a combination of both) that others may have missed. Understood this way, the process of innovation—at least in the early stages—is all about increasing the signal-to-noise ratio.

Finding the right new signals often starts out awkwardly. How often we use the phrase “working title” or make up elaborate project names, partly because we don’t quite know what to call the invention at first—a symptom that the innovation is anything but at home yet.  

We see examples of this all the time in invention workshops. When inventors get very intrigued with a line of thinking and/or a particular embodiment, a struggle can instantly arise.  Part of the struggle is a search for the right words to describe what inventors can see in their mind’s eye but lack words to describe.

This is why diagramming what is in the mind is so important and useful; particularly at times when collaborators become, as our associate John Philipp calls it, “inventors-in-heat,” and even whole new words get invented. This is one of the characteristics of novelty that makes the process of innovation so challenging. We not only have to invent the thing itself, but often the new words or phrases to describe it.

 

When popular culture puts an “ing” on the end of brand name we know the innovation has found a permanent home in society. “Podcasting” is a recent example (it’s startling how this one happened so quickly). “Horseless carriage” was the phrase we first used in reference to what we now call the automobile.

When viewed in hindsight, the words all seem to make sense and fall into place. When we are in the midst of the process of innovation, however, it is a little different. In fact, the process of innovation can be viewed as a sense-making process, requiring innovators to discover and isolate a new signal from what others may have considered merely background noise. Metaphorically speaking, innovation is about creating new signals in the process of creating new value.

As innovators, our never-ending task is to increase the strength of the new signal and decrease the noise and interference around it.

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

Darwinian Innovation

Adaptation is an essential capability in a company's ability to innovate. 

External conditions change, sometimes quickly, sometimes slowly.  Competitors can either replicate your company's success or erode the difference between what your company offers as compared to what the competitive company offers (commoditization). Customers can change requiring more of this or less of that, and these changes affect the relative value of what your company offers them. Internal developments aimed at improving existing operations reveal vulnerabilities and opportunities, and naturally lead to variations. The ancient philosopher Heraclites said something to the effect that you can't put your toe into the same stream twice.   This is as true for individuals as it is for business, even though the flows of the streams may vary.

The need and ability to adapt is essential for all companies, and arguably more difficult, for companies with established track records. The success of established companies is predicated on doing some things right and doing enough of the right things. Many, if not most of these companies, started from an original, entrepreneurial adaptation. Their success was born out of a fresh insight and the ability to effectively make or deliver a value proposition to customers for an acceptable return. As success grows, that very success can become the enemy of innovation, as it creates resistance to subsequent adaptations in the need to focus and concentrate resources on the original success formula. Subsequent adaptations from success is not only counter-intuitive, it may also be counter-productive. Like they say, if it ain't broke, don't fix it.

A worthwhile look at adaptation can be found in Geoffrey Moore's recent book, Dealing With Darwin: How Great Companies Innovate at Every Phase of Their Evolution. Moore's book caused us to return to the Darwinian algorithm—variety, selection and retention—as the essential elements in the process of adaptation in the context of innovation. These elements also differentiate the roles of sponsors from innovation midwives, two of the three key roles in many organization's informal and implicit innovation networks.  

Variety

Companies that successfully innovate repeatedly work with a portfolio of potential innovations.  Venture capitalists manage risk in part by simultaneously investing in not one, but a set of distinct ventures. Ian McMillan's Entrepreneurial Mindset reminds us that even entrepreneurs have a list of alternatives, knowing that at any time the number one item on their list may run into an immovable roadblock. They keep alternatives to which they can quickly move if they have to.

The capability to generate or percolate a variety of alternate innovation opportunities in which to invest is a principle that is generally acknowledged.  However, developing, maintaining and re-circulating reservoirs of customer insights, collaborative relationships and technologies, in addition to specific integrated business opportunities, may not be done as formally and systematically as it could be done. Likewise, keeping several innovative balls up in the air may be only half of the challenge in maintaining variety. The other half may be the discipline of listening and observing both external and internal realities and how they may be changing or not, being careful to differentiate signals from noise. Remember Peter Drucker's observation that the most reliable source of innovation comes from what surprises the firm, whether good or bad, big or little.

Selection

We can't do everything, even if we did have sufficient resources. Adaptation demands choice, focus and a certain degree of concentration of our time, talent and expertise. When we select, we often rely on conceptual analysis and internal debate. When the environment selects, the selection is based upon survival and experienced success or what some call resilience. 

Too often our selection processes rely exclusively on conceptual analysis and internal debate.  While these are essential to any selection process, they need to be counter balanced with actual experience, preferably in the field. So much of the success of an innovation is based upon the right combination of micro-foundational elements, choreographed in the right dance. In short, selection is based both upon our choice between alternatives and the readiness, receptivity and recognition—acceptance—of the intended beneficiaries (market).

Retention

Perhaps paradoxically, once we have committed to an innovation, based on analysis and some experience in the field, adaptation shifts (adapts again) to a new state—one that is all about effective execution. Certainly there is fine-tuning that will inevitably be required as we introduce and integrate the innovation. However, at this stage, the continued success of the innovation selected—assuming that we made the right selection—is all about what innovation academics often call diffusion and what marketers call market penetration, which requires us to draw more from operational than innovation skills and disciplines.

Adaptation is the key that unlocks the door of sustaining a stream of innovations, and echoes back to the nurture vs. nature debate: you are a product of your environment (nurture) or you are a result of your genes (nature). The truth undoubtedly lies somewhere in between. So also with the micro-foundations of our enterprise's success, some of which come from effective management and execution and some of which comes from the unavoidable collaborations with our business's external environment. Gary Erickson, founder of Clif Bar & Company, and Hiroshi Okuda, Toyota's recently retired CEO, both know that an essential part of adaptation is to pay attention to the signals within and around you and act on what you sense in order to gain first hand experience. When you do, you are well on your way to successful adaptation.

This article was originally published in Innovating Perspectives in July 2006. For this and other back issues of our newsletter, please visit our website at innovationsthatwork.com or call (415) 387-1270.

Argue with Success

“Success is the enemy of innovation.” Peter Chernin, chairman and chief executive of the Fox Group, said this a couple of years ago. Whether he originated it or not, the tone of his voice when he said it convinced me that he understood its truth first hand.  

Its truth is what makes innovation efforts in an “only-child” entrepreneurial start-up so very different from those efforts in a “multi-sibling” enterprise, or when the former grows into the latter. Without strong parenting, the older, better established “siblings” often protect their own interests to the detriment of the younger sibling. In families, it’s called sibling rivalry; in corporations, it’s called competition for resources.

While this rivalry for resources may take many forms, there is also another reason why success can become the enemy of innovation. Operations, which is defined as any part of the enterprise that generates cash from customers, comes to rely upon the disciplines of focus, alignment and tight coordination. These disciplines are essential for improving efficiencies and maintaining profitability. However, these very same practices are not conducive to the open dissent and debate required to discover and pursue new market opportunities and new value propositions. 

By definition, novelty is an essential characteristic of any innovation: incremental, radical, disruptive or otherwise. Because of its very nature, novelty has to be understood, played with and debated so that the value there within is understood. What is new requires an introduction; and effective introductions, paradoxically, work when they make the new more familiar. Often there is some positioning, or framework for making the new seem, well, not so new that it scares off the potential user or customer. Getting the introduction right can be as important as the innovation itself.

A poor introduction—based upon an incomplete or misunderstood value proposition—can make or break the innovation’s future. This is precisely what happened when Kimberly-Clark back in the 1980s attempted to introduce Avert™ as an anti-virus facial tissue. Though it was a facial tissue in form; in function, Avert—recognized as one of the most innovative new products in the year it was tested—belonged not on the shelf next to facial tissues, but next to cold remedies. 

In their book, Innovation: The Missing Dimension, authors Richard Lester and Michael Piore differentiate between analytical and interpretive kinds of innovation sub-processes. Their premise is that an all too common mistake in our innovations efforts arises when we apply analytical practices too soon and don’t do enough interpretive work early in the process. The impatience of operating entities is one reason; discomfort with the open dissent necessary for the exercise of interpretive skills is another.

When we avoid anything outside our comfort zone, the seeds of “group-think” get planted and one of the first things to go is a climate of open dissent. Focus and alignment become more important than purpose and vocation and the successful company begins to lose its feel for the signs and still small voices of its next entrepreneurial opportunity. Examples are easy to come by: the traditional airline carriers and GM, Ford and Chrysler (not long ago we called them the big three.)

In a recent New Yorker essay, James Surowiecki quoted Yale Professor of Management Jeffrey Sonnenfeld as saying that a successful board of directors needs a “culture of open dissent.” This could apply as well to the leadership and management of our innovation efforts—our innovation boards. A climate of open dissent is “where members are free to criticize the CEO or each other, and there is no artificial attempt to impose consensus on the group.”

Surowiecki writes, “This is hard to achieve, because dissenting opinions often get interpreted as personal attacks. Social scientists like to say that good decision-making groups engage in ‘task conflict,’ fighting over the best solution to particular problems, while bad ones engage in ‘relationship conflict,” interpreting differences of opinion as differences of character.

But, as Tony Simmons and Randall Peterson of Cornell University mention in their study of seventy top management teams, groups that engage in task conflict also often suffer from relationship conflict. In other words, it seems you can be collegial and friendly and make bad decisions, or you can be locked in a room with people who can’t stand each other and make better decisions!

“Simmons and Peterson identified a surprisingly simple way out of this dilemma: trust.  They found that groups whose members trusted one another’s competence and integrity were more likely to engage in task conflict without succumbing to relationship conflict. Paradoxically the more people trust one another, the more willing they are to fight with each other.”

We hear the same message from Matthew May’s book, The Elegant Solution, on Toyota’s formula for managing innovation, points to the way Toyota attempts to institutionalize this climate of open dissent. “Hierarchy stifles innovation, and we need open and honest disagreement about every idea. [Because] every idea counts!”

This article was originally published in Innovating Perspectives in November 2006. For this and other back issues of our newsletter, please visit our website at innovationsthatwork.com or call (415) 387-1270.

Knowledge Creation: The Basis of Authentic Innovation

As a student of innovation for over 25 years, a recent study of Toyota’s innovation management system is challenging some of my beliefs, biases and assumptions.

Thanks to Tom Ruhe of Hewlett-Packard Company and Bruce Beihoff of Whirlpool Corporation, who gave a presentation on Toyota’s unconventional wisdom at the Innovation Practitioners Network meeting in Dallas last week. I am taken back to basics: to a renewed understanding of what innovation is, in the first place, and its proper place in the scheme of things.

Ruhe recently shared how Al Ward defined innovation, through the experience of Toyota, as “learning applied to create value” [for customers]. Don’t let the simplicity or brevity of Ward’s definition deceive you. Ward seemed to know what Toyota has experienced: knowledge creation is the basis for authentic and substantive innovation.

So much of what we hear, read and even experience ourselves these days relating to our organizations’ attempts to innovate lacks this basis in knowledge creation, particularly creating knowledge where it matters. Too many of our innovation efforts are motivated by the desire to differentiate or create something new without either a deeper understanding of the value that is needed or the causalities of the underlying system. It is no wonder that we remain for the most part disappointed in the results of our innovation investments. The Boston Consulting Group’s latest survey reaffirms previous surveys’ conclusions of the dissatisfaction of executives in the returns on their innovation investments (Business Week, May 14, 2007).

Would Toyota bring to market a product or feature innovation simply because it is new or different? I suspect not. While novelty, patentable inventions and differentiation may be necessary in highly competitive markets, new value for customers is even more important. It is the foundation for authentic and substantive innovation.

For the past several years I’ve been participating in an interesting but largely theoretical debate regarding which comes first, invention or discovery. Now after being introduced to Toyota’s approach to innovation management, I am ready to conclude what they learned some time ago. Discovery (i.e., creating new knowledge where it matters the most, especially to customers) precedes invention and is essential for it. At least two practical implications stem from this insight:

•  delay efforts to generate solution ideas until such time as a solid hypothesis, experience-based insight and/or understanding of the system is developed, and

•  spend time up front in knowledge creation efforts—particularly through collaborative diagramming of relevant systems, experimentation (both thought and actual experiments), and clarifying purpose and potential value.  It is absolutely necessary and will pay off handsomely in the long run.

Innovations that are not based upon knowledge creation end up short-lived if they have any life to begin with.

This article was originally published in Innovating Perspectives in May 2007. For this and other back issues of our newsletter, please visit our website at innovationsthatwork.com or call (415) 387-1270.

Inventing for the "Next Bench"

If necessity is the mother of invention, then this period we are all going through could prove to be a golden age of invention.

The value of the “gold” in this golden age may derive more from the quality than the quantity of the inventions created during this period. By quality, we mean the invention’s impact, its breadth and duration of influence on society. While there are an enormous number of inventions clogging global patent and trademark offices, the substance, value and societal significance of many of these inventions may improve the patent holder’s competitive interests more than advance society’s intrinsic interests.

Several years ago client work took me to Cleveland, Ohio, and so I scheduled an extra day to visit the Inventors’ Hall of Fame in nearby Akron. The building itself is an interesting monument to invention and design as the architecture creates a pathway that guides the visitor through a history of invention in the U.S. and winds its way to the inventors’ wall of honor.

Hanging on this wall are over 200 photos of the inductees. As my eyes went from one portrait to the next I began to ask what all these inventors may have had in common. I also noticed some inventors were “absent,” like Buckminster Fuller, who I would have expected to see, but did not. The surprise at these omissions caused me to inquire about the selection process. What criteria did they use to select these particular inventors? 

The lasting and widespread impact that the invention had on society was the answer. If the inventor’s invention had made a significant impression on society—both in its breadth and duration—the inventor became a viable candidate for the hall of fame. It was not the number of his or her inventions, nor even the admiration, money or worldly success enjoyed by the inventors as a result of their inventions. Rather, it was the sustained value to society of their contributions.

Now with the banks’ plumbing clogged with mistrust, the precipitous decline in home values, and the fear based cuts being made by so many of our companies in response to what appears to be a protracted recession, mother necessity should be very fertile with invention. However, it may be a very different kind of invention—the kind not driven solely by the interests of competitors.

While our own companies suffer from their own necessity during these times, it is important not to lose sight of the necessities affecting our customers. Inventing with their interests in mind may be more important to them and to us, than keeping our competitor at bay. The challenge is to see empathetically beyond our own necessities—those that often blind us to the needs of others—so that we can make the contributions that need to be made.

In Hewlett-Packard Company’s go-go years, there was a lot of “inventing for the next bench over.” Engineers would rub shoulders with future business opportunities by merely seeing a problem lying there on the next bench over that could be inventively solved. Their proximity to the problems enabled their empathy, imagination and knowledge to create a rich ground for invention to occur naturally.

Perhaps these times of necessity will bring us closer to those “next benches over,” giving urgency, relevance and necessity to our creative focus and efforts.

This article was originally published in Innovating Perspectives in March 2009. For this and other back issues of our newsletter, please visit our website at innovationsthatwork.com or call (415) 460-1313.