Innovation Conversations with Scott Anthony

I had the opportunity recently to interview Scott Anthony, President of Innosight and the author of "The Silver Lining" about a variety of innovation topics including: 'The Great Disruption', barriers to innovation, education, leadership, and commodity businesses.

Here is the text from the interview:

1. What is the biggest challenge that companies face in the Great Disruption?

I think the biggest challenge facing companies is an unwillingness to let go of the past. Companies have to come to grips with the fact that what made them great in the past will not make them great in the future. That doesn't mean they have to completely walk away from their heritage. But they to constantly question the status quo, think about the businesses they are not in that they should be, and be willing to walk away from businesses before they need to. It's a tough challenge.

2. What stands in the way of many companies being able to deliver new innovations to market?

Well, I think it is important to note that companies don't struggle with all types of innovations. Most companies excel at managing innovations that extend their core business. They struggle with innovations that run counter to their existing way of operating. Then, the greatest enemy lies within. We call it "the sucking sound of the core." A company's core systems and structures "want" an innovation to conform to what a company has done before, not what is necessary for success. The sucking sound makes innovation slow and complicated. To break the sucking sound of the core, companies need to make sure they have a "safe space" for innovation, and that senior leaders actively step in to break standard operating procedures when required.

3. If you were to change one thing about our educational system to better prepare students to contribute in the workforce of the Great Disruption, what would it be?

The one thing I would want to see students trained in is non-linear thinking. The era of optimization is over. We are in an era of constant creative destruction. Students need to learn how to find the non-obvious insight and to imagine possibilities that don't yet exist. I worry that an increased focus on standardized tests runs counter to the needs increasingly facing companies.

4. What skills do you believe that managers need to acquire to succeed in the Great Disruption?

The basic problem facing many managers is they are being asked to solve problems they have never faced before. You see, it used to be possible to have a productive 40-year career being an operator that did a great job executing a solidly formulated strategy. Today's leaders have to be great operators and great innovators. They have to pass that old F. Scott Fitzgerald test of holding two opposed ideas in the mind at the same time, while still retaining the ability to function. In simple terms, managers have to learn how to find the "and." Disciplined and creative. Love big businesses and small businesses. And so on.

5. What advice do you have for companies that are already loving the low end in a commodity business?

Companies that are already loving the low-end should think about innovative ways to extend and grow their business. One way to do so is to add on additional offerings that help customers solve additional problems they are facing in their lives. This could be a new feature, it could be a service. Another approach is to see if there are other markets where they can bring their low-cost acumen. A low-cost business model is a powerful weapon that companies can deploy in multiple markets.


As a special bonus, here is a video of Scott Anthony being interviewed about "The Silver Lining" by Business Innovation Factory's Chris Flanagan:





My book review of "The Silver Lining" can be found here.

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Book Review - "The Silver Lining" by Scott Anthony

A couple of weeks ago I received "The Silver Lining" by Scott Anthony in the mail. "The Silver Lining" is a relatively short, easy, and pleasant read. Scott introduces several different concepts in the book in addition to the main thesis - which seems to be that companies must prune their innovation portfolios, refeature their products to meet ever-changing customer requirements, and re-tool their organizations to better deal with the constant change that is becoming the norm in the world today.

The first concept that Scott introduces is a term to refer to the current economic dis-equilibrium - 'The Great Disruption' - and the rapid change that organizations face. Here is a great quote from the first chapter:

• "The biggest silver lining for innovation is that the scarcity that is sure to result from the current economic climate is actually a good thing for innovation. Abundance is actually the root cause of many corporate struggles with innovation."

Another key focus of the book is detailing the importance of pruning your innovation portfolio. This a great analogy for re-evaluating your innovation investments, as often in cutting back selected branches you make the overall plant or tree healthier and allow it to grow stronger upwards. With innovation portfolios it is the same. Often many organizations allow too many projects to continue consuming resources that should really be 'pruned' so that those project resources can be re-deployed to help the remaining projects become more successful and complete faster.

At the same time, Scott Anthony makes the point that opportunities may exist for organizations to refeature products in ways that both reduces costs and increases sales. Pursuing this strategy can also reduce options available to potential disruptive competitors seeking to enter the market.

Smart companies will also use 'The Great Disruption' as an opportunity to re-tool their innovation capabilities and processes while also utilizing their potentially reduced innovation budget to conduct smart strategic experiments that could include exploring open innovation or low end opportunities ('learning to love the low end').

After describing how to love the low end (which is very similar to how companies should approach any disruptive innovation), Scott Anthony concludes the book with his thoughts on personal reinvention and his views on what's next for innovation.

Another favorite quote from the book (which I've heard elsewhere) suggests that you should staff up a disruptive innovation project or a strategic experiment with the best people you can find for each element (not the people that have been successful in the mainline business):

• "Good entrepreneurs don't take risk, they manage risk."

Overall, Scott makes some good points about pruning the innovation portfolio, retooling the organization for better innovation success, and addressing the low end of the market that make the book a worthwhile read.


My interview with "The Silver Lining" author Scott Anthony can be found here.

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Further Q&A from UTEK Gary Hamel Webinar

I received some additonal notes from Hallie Middlebrooks of UTEK Corporation from the Gary Hamel "Innovation in Tough Times" webinar on February 17.

After cleaning up what I got, it is my pleasure to present these additional questions and answers from both Tim Jones, Ph.D., and Regina Lewis, Ph.D., below.

Q: In the Economist a couple of issues back, it was suggested that companies are pulling back from innovation and re-focusing on the bottom line and conserving cash. Are you seeing this in companies you consult with?

TJ: Yes in some areas but not in others. It differs both by market and my management stance: we are seeing steel companies proactively invest for the future even when laying-off staff and seeing FMCG companies cutting budgets at the same time as having highest profits ever

Q: How can FMCPGs take advantage of people tracking technologies - or will it only be for the retailer partners?

TJ: It is fully joined up opportunities that are being explored so that the product and the person are interlinked. If you combine RFID and mobile technologies together you can tell where both people and products are and so better understand useage etc. In addition people behaviour anlysis from tracking is highlighting unmet needs for new products

Q: What are the ways in which large diversified companies fund new innovations that cross several divisions or business units?

TJ: Several different approaches in play, but worth looking at the likes of Philips which has central design and R&D resources that work on projects dedicated to and hence supported by business units but also do about 30% of their innovation at a cross sector/cross business level - and this is where the interesting stuff is happening - white LEDs, integrated medical devices, etc.

Q: What do you think about competitions for idea generation? Can you give some best cases/learnings regarding competitions conducted till date?

TJ: Good but only if focused around a specific theme or challenge, otherwise a waste of time. We found that Marks and Spencer, Nestle and Nokia have all introduced good approaches over the years that others now emulate

Q: How do we build people to think about business cases when even the mention of it makes them very sick ie. Most people come up with ideas, but not really business ideas, or business cases. When we ask for business cases, they tend to shy away from that and so how do we tackle this issue to change the mindset of people in organizations? My question is: How can we change people to think about "business ideas" rather than normal ideas which has to be refined to a "business idea" to make it an innovation

TJ: Get over the idea of a business case as a heavy document - it is better as a compelling story which could be a simple diagram. Key issue with business innovation is to give people examples from outside their sector, discuss and then put thru filter of 'how could this approach help us' and then scope the concept. We run 1 day workshops with companies which typically use 10 different examples in the morning to engage and stimulate and by lunch we have three identified as being potentially relevant. The pm session is then spent working these up, pitching them and refining so that company has credible understanding of opportunity, ROI and roadmaps, etc.

REGINA: My feeling here is that every org should have a dedicated strategy team - or person, at the least -- that moves "ideas" along the continuum from being just that to being development initiatives. Someone must "own" the innovation stage gate process, with all of its go/no-go gates.

Q: Do you have any ideas what companies are going to make it through this economic downturn -- maybe have each person answer three companies they think...?

TJ: My top three are Nokia, Reckitt Benckiser and H&M but all those profiled on innovationleaders.org are well placed to be ahead of the pack
REGINA: Mcdonalds, Walmart, IHG.

Q: What should B-schools be doing differently to better prepare employees for the innovation and critical thinking challenges of today's workplace?

TJ: My opinion is that they should get rid of 50% of what they teach and get MBAs experimenting more - if you look at how Lego is working with the London School of Economics and Copenhagen Business School that will show you way people could gain new experiences that will be valuable in practice

Q: How do you differentiate between a fad versus a large unmet need (sustainable trend is probably better than large unmet need)

TJ: Fads tend to be short term, trends are medium term extrapolations of today - the new unmet needs are to be found in neither of these areas - cross sector foresight is where we see companies from P&G, Shell to the BBC getting real insights to drive innovation

REGINA: Any longitudinal "pulse taking" can give you a sense for the rates and which people are coming on board and actually changing their buying behavior. For example, I have been following the "greening" trend for quite some time... and so have understood its momentum.

Q: What advice do you have for small organizations trying to make a 'many small bets' innovation strategy work during a down economy?

TJ: Get rid of 75% of the small bets by filtering against global not local leadership and then focus resource on the 25%

REGINA: I advise against a "many small bets" strategy. I believe companies must focus knowledgeably on those few big potential wins.

Q: Do you believe that the current economic situation is a structural versus a cyclical shift? What will be the impact and fall-out on companies on and their product portfolios?

TJ: Depends on sector - for some like pharma and energy it is just a cyclic issue. For others like banking this is clearly a revolution opportunity. Others are in between and the winner will be those that use this as a catalyst for innovation

Q: How will premiumization and mass luxurization be impacted?

TJ: The me-too brands will suffer as authenticity rides high: Rolls Royce sales are not suffering as the rest of the sector plummets - the same is true in fashion, travel and wine

Q: What are the basic bare bones of innovation process that anyone could apply to be a successful innovator in current economy?

TJ: Lots of people have different views. I prefer the approach used by Reckitt Benckiser who is easily the most successful FMCG company around - take a look at their performance and profile on innovationleaders.org. Basically they have two decision points: is this a good idea that is better than what we had before and consumers will probably buy - that gets it into development. Then after development question is - is this an even better idea than before that offers a reason to believe for consumers that they will pay more for - that gets launch approval

REGINA: Know your customer. Understand their unmet needs. Be aggressive in solving for them.

Q: What roles do normal people in organizations play in terms of making management innovation happen?

TJ: Depends on organization but everyone can have a contribution depends at what level - look at Tesco for great cross organization innovation around continued customer focus and then look at others on innovationleaders.org like Virgin Atlantic for innovation coming from expert group

REGINA: Everyone can play a role in innovation via passion for the customer, and an enthusiastic belief that we can create change.

Q: What are the different methods and principles using in separating ideation and innovation management?

TJ: Loads on ideatools.com

Q: Is innovation in products, services, business models, etc. being pushed down in importance as companies are focusing on cash flow and preserving capital in the current economic climate?

TJ: Depends on sector - it differs both by market and my management stance: we are seeing steel companies proactively invest for the future even when laying off staff and seeing FMCG companies cutting budgets at the same time as having highest profits ever.

REGINA: At IHG, innovation is the "hot topic" of the year, as we want to be at the forefront once conditions improve.


@innovate