Innovation Perspectives - Leader's Role in Trend Spotting

This is the first of several 'Innovation Perspectives' articles we will publish this week from multiple authors to get different perspectives on 'Who should be responsible (if anyone) for trend-spotting and putting emerging behaviors and needs into context for a business?'. So to kick it off, here is Jim Estill's perspective:

by Jim Estill

I believe that it is the leader's role to be active in spotting trends in both the market and within the company. Of course in order to do this, they need to get the assistance and input from all of their people.

A leader who believes in Trend Spotting and believes in capitalizing on emerging trends and technologies can set the example for staff to create an openness that new ideas and trends are brought forward.

I found when I was leader of a 2 billion dollar organization that the bulk of the emerging trends were presented to me filtered through a number of different eyes of people who worked for me, people in the industry, people in the press, etc. and the trends tended to be a synthesis of ideas.

The following are my seven rules of Trend Spotting:

1. If trends aren't going the way you want them to go, then create change. One of the best ways to have a trend and for everyone to think you're genius for knowing the trend is to nudge it along or create it. As a leader of an organization, you often have lots of resources like sales, marketing, R&D, etc. that you can put towards creating a trend.


2. Different trends are worthwhile for different companies at different ages and stages and resource capacity. I'm a business optimist and believe that there are right-sized business opportunities for every company at every size and that successful companies are the ones that choose the right-sized opportunity for them. Just because something is a trend, does not mean a company is positioned to take advantage of it or that they can make money on it.


3. Existing companies are often hampered by their own paradigm. What got you here won't get you there. It's difficult, particularly for companies that are doing reasonably well to consider going into new markets and looking at new trends since they've profited by the old patterns. It takes a great leader to be willing to give up a proven company method and to risk some on emerging trends.


4. Leaders are meant to lead and to be visionary, managers are meant to implement and be tactical. If you're the leader of an organization, recognize that your greatest value is in being visionary (even though implementation still counts). That would mean Trend Spotting...


5. A leader needs to set the example by being open to new ideas. They also need to free up resources where required in order to allow their company to take advantage of trends.


6. I have been wrongly credited with being a genius at spotting trends. The reason why I say "wrongly credited" is I often placed multiple bets on multiple horses within a technology race at the same time. So I was right when I joined the board of RIM. Blackberry did become huge (and I still sit on that board today). I was right when we signed Apple as a product line in 1992 when everyone said they were going bankrupt. At the same time, I did these "genius moves" I also invested in a number of companies which are no longer here today and I sold a number of product lines from companies you've never heard of because they've also gone away.


7. One of my favorite mantras is "Fail Often. Fail Fast. Fail Cheap." So although I have my foot planted firmly in multiple camps, I don't risk so much that failure in one area creates a failure.

It's the leader's responsibility to spot trends but clearly this is not done in a vacuum, it's their role to inspire everyone to give them input.


You can check out all of the 'Innovation Perspectives' articles from the different contributing authors on 'Who should be responsible (if anyone) for trend-spotting and putting emerging behaviors and needs into context for a business?' by clicking the link in this sentence.

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Jim Estill is a venture capitalist, author and business consultant. He sits on the board of RIM. He is a blogger at www.jimestill.com or follow him on twitter @jimestill.

Are you an Innovation Venture Capitalist?

by Paul Sloane

The most innovative leaders have a mindset like that of a venture capitalist. They take a portfolio view of innovation projects. The venture capitalist will invest in a basket of different start-up companies, fully knowing that most will fail. A few might break even and one or two might be successes. But one big success can pay back the costs of all the failures. Even though he is smart, the VC does not know at the outset which ventures will succeed and which will fail so initially he backs them all. As time goes on he cuts funding for the failures and gives more to the winners.

It is the same with prototypes in business. The leading innovators run many different pilots and measure progress carefully. They chop the losers but pour more resource into the successful trials. That way they are first to market with the real winners.

VCs use a portfolio approach so that they balance the risk of losers with the upsides of winners. They are comfortable with the knowledge that many of the ideas they back will fail. They are also comfortable with quantity. They receive hundreds or thousands of business proposals every year from all sorts of diverse sources. Many of these have already been rejected by several other VCs but that does not matter.

The VC sets his own criteria and selects several ideas to support and put into his portfolio. If the business plan then misses its targets or milestones or the customer reaction is poor or the technology fails to deliver then the VC is sanguine about pulling the plug on this investment. He wants to put more resources into the portfolio ideas that are working and he is quite relaxed about strangling the losers. If he can cut his losses and get out early he will.

Contrast this with a typical corporate environment where a small number of new business proposals are considered. A handful is eventually selected and then every effort is made to make them succeed. Failure is abhorred. Extra resources and efforts pour into the CEO's pet project even when the market is screaming that this one won't fly. Emotion and egos come to the fore.

Think like a VC and remember these key points:

• Quantity is good - we want lots of ideas


• If an idea has been rejected before, we are happy to consider it again


• We will select the most promising on objective criteria


• We want a return on our innovation portfolio as a whole


• We know that many of the more radical ideas will probably fail


• We will focus our resources on the winners and cut resources on the losers

Why not get a venture capitalist to speak at your next executive meeting?


If you enjoyed this post, check out Blogging Innovation's book review of "Innovation Tournaments" and its interview of co-author Christian Terwiesch.

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Paul Sloane writes, speaks and leads workshops on creativity, innovation and leadership. He is the author of The Innovative Leader published by Kogan-Page.

Optimizing Innovation - Dr. David Matheson of SmartOrg

by Braden Kelley

We are happy to bring you some of the key points and insights from Dr. David Matheson's talk at the Optimizing Innovation Conference, which was held October 21-22, 2009 in New York City.

Dr. David Matheson of SmartOrg conducted a workshop on optimizing profitable growth in uncertain times. He started by talking about how when it comes to innovation, you should always start with the following three questions:

1. Does anybody care?


2. Can we do it?


3. Should we do it?

And then explore some of the things that make innovation difficult to pursue:

• Time horizon
• Payback
• Uncertainty
• Risk
• Competitive Landscape
• Scale & Reach
• Mission Fit
• Incentive Structure
• Market Adoption Rate
• Regulation
• Past Experience
• Unknown Unknowns

You have to keep in mind that the mental models that people use for project evaluation, don't work for innovation (assumption, hockey sticks, etc.).


"How good are you at articulating your ignorance?"


When it comes to evaluating innovation projects and building an innovation portfolio, you have to make people state percentage ranges (one person's definition of likely is different than another's). But keep in mind that these may change with new information. Focus on the range not the assumptions.


"Nobody knows the future."


As much as you might try and look for it, data does not exist on the future. Gartner reports are often extrapolations made by recent MBA graduates - they are not data.


"If I walked in and asked for $500,000 and said I could make $2,000,000, the COO would laugh at me and I wouldn't get the money. But if I asked for $500,000 and promised $750,000 then I would get it. Why is that?"


A company's culture and our own credibility pose challenges for people pitching innovation ideas using the expected costs and expected returns.


"In the room here you just validated that most of you spend money on validating what you think you already know rather than testing what you are most afraid of."


"In would argue that to follow the fail fast principle and maximize learning, that you should invest in testing proof points, not in validaton."


If it is a good calculate risk made on the best information you are going to get, with appropriate offset for risk, then it is a good investment.


"If you want more certainty, you'll get more mediocrity."


"Project Risk is not equal to Portfolio Risk"


It is EXTREMELY important that you do not transfer corporate risk to individuals if you want to succeed in innovation:

• Measure Value


• Embrace Uncertainty


• Maximize Learning

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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.

Is there something to like about Sara Lee?

by Steve McKee

I've kept my eye on Sara Lee for several years now, originally because the company was a poster child of the Loss of Focus principle. But in 2005 new CEO Brenda Barnes introduced a plan to streamline Sara Lee, which analysts would have described as a conglomerate but could more accurately have been characterized a beast.

Launched in 1939 as C.D. Kenny Company, over the course of the next sixty-plus years the organization acquired and divested brands in industries as varied as supermarkets (Piggly Wiggly), electronics (Electrolux), apparel (Aris Isotoner, Hanes, Champion, Playtex), shoe polish (Kiwi), and even chemicals (Oxford Chemical Corporation). It took its present name from a company acquired in 1956, The Kitchens of Sara Lee.

By the early 2000s Sara Lee's strategic chickens had come home to roost in the form of slow sales growth and weak earnings. A company that had fueled growth for decades through artificial diversification had simply become too unwieldy to manage.

That's when Barnes launched (according to internal company documents) "a bold and ambitious multi-year plan to transform Sara Lee" by divesting brands comprising 40 percent of its revenues and focusing R&D efforts on food. By 2007 Sara Lee was increasing market share faster than any of its major competitors, and last month Barnes announced that she was selling Sara Lee's deodorant and skin care brands to Unilever. When asked about the rationale behind this recent move, Barnes - no doubt for the umpteenth time over the past four years - said, "Our intent is to build a great business in food and beverage." (It was a "multi-year plan," remember?)

Count me a fan. Contrary to the strategic flailing about demonstrated by many companies when they encounter rough waters, Sara Lee has kept its focus. Barnes has consistently executed on her now four year-old strategic plan, and the nearly $2 billion take she'll get from the sale to Unilever will equip her to further strengthen Sara Lee's food and beverage brands. Which will leave a good taste in the mouth of the company's investors. Smart.

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Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.

Innovation Tournaments Interview

Interview - Christian Terwiesch of "Innovation Tournaments"

I had the opportunity to interview Christian Terwiesch, one of the co-authors of "Innovation Tournaments" about how to create and select exceptional opportunities. We also discuss a variety of other innovation topics including: barriers to innovation, education, and metrics.

Professor Terwiesch teaches MBA and executive classes in the areas of operations management and product development at The Wharton School of the University of Pennsylvania. He also holds a visiting appointment at INSEAD in Fontainebleau, France.

Here is the text from the interview:

1. When it comes to innovation, what is the biggest challenge that you see organizations facing?

Innovation is seen as an art and organizations believe that the best way to nurture innovation is to simply create the right organizational culture and environment for people to become creative. Open floor spaces, many meeting rooms, x-functional collaboration, etc. But it is not enough to rely on culture and the passion of individuals. You need to put processes in place and you have to equip people with the right tools of innovation. Innovation is NOT an art, I can teach you the basics of innovation in a day. I found innovation tournaments to be one great tool for people and organizations to move to a more process driven approach to innovation.


2. From your experience, what are some of the keys to increasing variability to help get the best ideas?

Variability is key in innovation and in innovation tournaments. The more diverse the set of ideas, the better are your winning ideas. But I find that many companies have a hard time coming up with high variability ideas. Those in charge of innovation always turn to the same people for ideas, they listen obediently to their bosses and to their customers. That kills variability. I'll give you another example - In some of our most recent research, we look at how brainstorming meetings function. Many of us are taught to build on other people's ideas in such brainstorming meetings. But our research shows that while this might make us feel happy and collaborative, the resulting ideas are actually less innovative. At least at the ideation step, you have to just break a lot of norms and existing molds.


3. What metrics do you usually see organizations using to measure innovation success?

Organizations need to measure innovation - what you don't measure, you do not manage. Talking to companies, I often see them struggle with measuring innovation - often I get asked "what measures should we track?". Organizations often don't know what they should measure. And so they measure what is easy to measure. Number of patents, percentage of revenues generated from new products, R&D spending, etc. You should not measure just for the sake of measurement. Before you measure, you first need a game plan, a strategy.

Let me give you an example. For managers, measures are what the dashboard is for a driver. They give you information about the way the process operates. Now look at the dashboard in your car. You are driving 60mph, your engine spins at 3000rpm and you currently get 20 miles per gallon. So what? These measures are meaningless unless you have some targets in mind. Is your goal to quickly drive from A to B? Then focus on speed and ignore the fuel efficiency. If you care about the environment, get into a higher gear (I like to drive with a manual transmission...) so your rpm's come down at the same speed and maybe you want to slow down to 50mph. Every performance measurement system needs to be custom built to fit your business needs. You cannot just ask a consultant for the "right measures".


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

I like to say "Fail quick, fail cheap, fail often". Innovation is all about failures. In an innovation tournament, you have 100s of 'losing' ideas for every winner. Our educational systems do not provide candid feedback to students. Every little project is praised as being great and every student is told that they did a 'good job'. So when these students graduate, they think that everything they touch is great. But they fail to understand that every great innovator loses far more often than they win. Innovation is not about avoiding failures, it is about recognizing a failure early and then learning from it.


My book review of "Innovation Tournaments" 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.

Creating Innovation Metrics

Measuring innovation is where the rubber meets the road. While it's very easy to wax eloquent about innovation, I've found that for most companies, measuring innovation is quite a tall order. Moreover, even for those organizations that do measure innovation, are they measuring the right metrics, for the right reasons?

I've authored many previous posts on the topic of innovation, and have lectured often on the necessity for executives to completely embrace innovation as a core focus area. The power of innovation to totally transform a mediocre business into a category dominant company is really only deniable by the ignorant or the prejudiced. However even those businesses that embrace the concept in theoretical fashion can fail to implement productive innovation management programs if they do not understand how to measure its impact. In today's post I'll address how to measure innovation.

So, how do you tell if an innovation initiative is successful? According to Scott Anthony at Harvard Business Online, perceptions of inital successes or failures are often times misleading when it comes to whether innovation will be successful on a sustainable basis. To validate his assertion, Scott presents a simple case-study of two innovation initiatives and asks which one would you deem as being the most successful:

• Innovation A: This initiative enjoyed huge first-year revenues of $200 million thanks to "a clear value proposition, clever positioning, and a strong distribution network."


• Innovation B: This initiative offered what was at best an ambiguous business model and generated only $220,000 during its first year.

So which initiative was more successful? "It's obvious, right?" he says. "Innovation A is the winning proposition." Not so fast... Is revenue the only thing that matters? Just because something is easy to measure, and appears to be an obvious win, in and of itself this doesn't necessarily constitute a victory. Were the right things done? Were the right metrics measured? Let's see...

• Innovation A was Vanilla Coke. "It was a line extension that largely cannibalized sales of Coke's other products," says Anthony, with the note that Coca-Cola unceremoniously discontinued the flavor only three years later.


• Innovation B was Google. Enough said.

The Take Away: "Before making a decision about an innovation," notes Anthony, "make sure you know what type of idea you are evaluating. Then make sure you use the right metrics for meauring the success of that idea."

There is great truth in the old axiom "you can't manage what you can't measure" and perhaps nowhere is it more applicable than as applied to the practice of innovation. Let me be clear... measuring innovation is not difficult at all if you understand it. The problem lies with the uneducated managers and executives who view innovation as a vague, ambiguous, and undisciplined area that sucks time, resources, and investment without demonstrable return. While the aforementioned sentiments couldn't be further from the truth, they nonetheless represent the opinion of many uniformed people in a position of authority. They simply don't know what they don't know.

There are three CIOs in the corporate world - the Chief Information Officer, Chief Investment Officer, and the Chief Innovation Officer. Of the three I believe the one position that a company cannot due without is the Chief Innovation Officer. As with any other important discipline, your enterprise needs to place someone in charge of innovation. Without a dedicated innovation champion it is likely that your initiatives will die a slow and painful death. Furthermore your CIO needs to be set up for success and not failure. This means that he or she must have total buy-in from executive leadership that innovation is a corporate mandate and not a corporate albatross.

Let me attempt to simplify what many strive to make complex. Innovation is simply a philosophical mindset that is used as a catalyst to accelerate growth and efficiency. It is a business driver and nothing more. However the reason innovation is one of the most powerful business drivers is simply because it is a disruptive, high velocity, and high return discipline that can create a much greater impact than other drivers.

The truth of the matter is measuring innovation is as simple as aligning your innovation initiatives with your business objectives. While innovation can be measured in many different ways, the following bullet points will give you examples to use when framing your metrics and analytics:

• What to Measure: Focus on measuring the things innovation is designed to impact: process, growth, differentiation, and profitability.


• Innovation as a Percentage: Measure the trends. Look at the sales growth or contribution margin caused by products or services launched within the near term (i.e. past three years) as a percentage of the overall line item. The greater the influence of innovation as a growing percentage of the whole category being measured, the more healthy, vibrant and sustainable your enterprise is.


• Track Efficiency Gains: Measure speed to market, milestone hit rates, benchmark productivity, and other metrics designed to measure innovation's impact on process and efficiency.


• Track Competitive Separation: Measure how innovation is impacting win/loss ratios, changes in market share, increases in brand equity, competitive differentiation and other competitive metrics tied to innovation initiatives.

The bottom line is that most of the current market data indicates that companies that embrace innovation as a key business driver are the fastest growing and most profitable companies in the market. Businesses that use innovation to create, disrupt and disintermediate will attract the best talent, have higher brand loyalty, and have the best chance at long-term sustainability. Don't hesitate. Innovate!

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Mike Myatt, is a Top CEO Coach, author of "Leadership Matters...The CEO Survival Manual", and Managing Director of N2Growth.

Creating a Culture of Innovation

I define innovation as an "organization's ability to adapt and evolve repeatedly and rapidly to stay one step ahead of the competition." A culture of innovation, when done right, gives you a competitive edge because it makes you more nimble with an increased ability to sense and respond to change.

A culture of innovation has less to do specifically with new products, new processes, or new ideas. There are of course discrete innovations such as the iPhone or a battery that is powered by viruses (MIT has developed this). These are valuable and necessary in order to create a culture of innovation.

But a culture of innovation is more than new ideas. It needs to be repeatable, predictable, and sustainable. This only happens when you treat innovation like you treat all other capabilities in your business. This means having, amongst other things, a defined process.

An organization's innovation process must achieve three things. It must:

• focus on the "right" challenges


• find appropriate solutions to those challenges, and


• implement the best solutions.

These translate into three "portfolios" an organization must create:

• A portfolio of challenges


• A portfolio of solutions


• A portfolio of projects

Let's take each one at a time.


A Portfolio of Challenges

All companies have challenges. They can be technical challenges on how to create a particular chemical compound. They can be marketing challenges on how to best describe your product to increase market share. They can be HR challenges around improving employee engagement.

An organization's ability to change (i.e., innovate) hinges on its ability to identify and solve challenges. Challenges are sometimes referred to as problems, issues, or opportunities. But at the end of the day, they are all just various forms of challenges. I will use these terms interchangeably here.

Where do you find these challenges? You can find them anywhere - from customers, employees, shareholders, consultants, vendors, competitors, and the list goes on.

Let's face it, companies have no shortage of challenges.

And guess what, some of the most important challenges to solve are hidden due to organizational blind spots and assumption-making.

The "meta-challenge" for all organizations is to find which challenges, if solved and implemented, will create the greatest value. Given that organizations have limited resources and money, prioritization is critical.

My favorite quote (used many times in this blog) comes from Albert Einstein - "If I had an hour to save the world, I would spend 59 minutes defining the problem and one minute finding solutions." Most companies spend 60 minutes of their time finding solutions to problems that just don't matter.

Therefore, the first step in creating a culture of innovation is to surface, identify, and codify challenges. And then you must become masterful at valuing, prioritizing, and framing these challenges.

Think of your innovation portfolio much like you would handle a financial investment portfolio. You want some safe bets (incremental innovation) and some riskier investments (radical innovation). You also want a variety of innovations ranging from technical challenges to marketing challenges, and service challanges to performance improvement challenges.

Once you have the right challenges to solve, the next step is to find solutions.

A Portfolio of Solutions

Every challenge has multiple potential solutions. And there are multiple ways in which to find these solutions.

Some challenges are solved in the moment by the person who thinks them up. Most challenges in fact are solved this way. These challenges tend to be "unarticulated" in that they are not presented to the organization as a problem to solve.

Other challenges are more complex and require specialized expertise. You need to find the right person(s) with the right knowledge.

Others require less technical expertise and are solved through creative thinking.

For each challenge, you need to first determine which mechanism would best yield a viable solution. Approaches include, but are not limited to...

• Internal Individual/Team: This is the most common way challenges are typically solved. This is when you use internal resources whose job is to solve these types of challenges. For example, this would be the development team members assigned to a particular product. They are paid to solve their product development challenges. Brainstorming is often the tool of choice.


• Internal Crowdsourcing: Sometimes the best solutions are found by people who typically do not work on this problem. It might be a customer service representative finding a great new branding idea. Or maybe it is tapping into R&D people who are in different parts of the organization. Sometimes this can be achieved through company-wide competitions. Read my article on how reality TV show type competitions can be used to stimulate creativity.


• Outsourced (External Single Source): Some challenges can be solved (and potentially implemented) by a third party who takes ownership for delivering the result. Typically, outsource partners are found through some type of RFP process. eLance.com is a well-known example of a platform that matches specific challenges with bidders who are able to solve specific types of problems.


• External Crowdsourcing: Some challenges are best solved by a diverse group of external solvers who can independently work on a solution to your problem. In some circles, this is referred to as Open Innovation. InnoCentive and 99Designs.com are two good examples of this. A challenge is posted and solutions are provided by a wide variety of solvers.

These are only a few of the many approaches. If one technique (e.g., internal team) does not yield a workable solution), try a different approach (e.g., external crowdsourcing).

Regardless of which technique(s) you use, the result will be a portfolio of solutions for the given challenge. Depending on the technique you use, you may end up with a low signal to noise ratio. This is the ratio of a signal (what you want - that is, good ideas) to the noise (what you don't want - the duds). Your success is often based on your ability to separate the wheat from the chaff.

The next step is to strengthen and select the best ideas, combining them into a comprehensive solution. If you find a solution that works, the next step is to implement.

A Portfolio of Projects

The final attribute of a culture of innovation is the ability to take all of the selected solutions and turn them into programs/projects so that they can be converted from ideas into reality.

Elsewhere on my blog, I discuss many different ways of making this happen. Some of them include "Build It, Try It, Fix It" - an iterative development process where you learn by doing rather than analyzing. Other more "waterfall" type development approaches are more linear and rely heavily on analysis and testing (analyze, design, build, test, deploy).

Regardless of how you implement, without this step, you end up with lots of ideas on the cutting room floor, none of which create value.

During implementation, it is critical that you keep track of the value proposition for each project, having the courage to change direction, or, in some cases, killing ideas altogether.

Bottom Line

A culture based on surfacing, solving, and implementing valuable challenges can make innovation repeatable and predictable. This requires more than just a process, it requires an entire innovation capability [read my perspectives on the innovation capability].

My mantra is, "When the pace of change outside your organization is faster than the pace within, you will be out of business." And as we all know, today's pace of change is crazier than ever. A culture of innovation, when done right, can give you a leg up in a highly evolving marketplace.

P.S. There are many different "techniques" that can be used at each stage of the process. Communities, social networks, customer-feedback systems, etc. These will be addressed more fully in future articles.

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Stephen Shapiro is the author of three books, a popular innovation speaker, and is the Chief Innovation Evangelist for Innocentive, the leader in Open Innovation.