Innovation in Practice

Innovation Telltale

If you want innovation in your company, hire innovative people. But how do you know if someone is innovative?  What do you look for?  What telltale evidence might suggest that a person has superior innovation skills?

Several years ago, I ran a youth hockey league for ages 6 to 18.  A laborious part of this volunteer job was managing the selection of players for the elite travel teams.  Fifty or so boys would compete for twenty slots on one of 20 teams.  A group of coaches rated players on skating speed, puck handling, passing, and shooting.  As league commissioner, I attended each evaluation…that’s right…all them.  That’s 100 hours of evaluations plus many more hours tabulating the data, selecting players, and communicating with parents. 

One year, I noticed something unusual in the data.  A bit of regression analysis of the evaluations told a remarkable story: every player selected on every team also happened to be the fastest skaters in their tryout pool.  In other words, we could have selected players with one simple variable, skating speed, instead of the tedious coaches’ ratings of multiple skills over multiple sessions. 

I was shocked.  We could have done a simple race from one end of the rink to the other, about 10 seconds in duration, for the entire group of candidates at each age group.  The first twenty to cross the finish line make the team.  Skating speed was essentially a predictor of all other hockey skills.  It was a telltale of hockey success.  Fifteen minutes of time trials could predict with perfect success the best players for twenty teams instead of 100 plus hours of evaluations.  It could have been that simple.

What is the telltale of innovation?  I think I know the answer.  But, just as with the youth hockey experience, I will need to collect data to be sure.  My hypothesis is mental searching speed, an idea that Yoni Stern at S.I.T. taught me.  This is a measure of how well you “Google” your own mind and memory for information or experiences when given a task.  The task in the case of innovation is to take a Virtual Product (a mental abstract produced through the S.I.T. method), and mentally search your mind to find many productive, innovative uses for it.  Whoever can find the most ideas for a given task is more innovative in my view.  They “make the team.”

My task now is to select a different team – a team of research collaborators to find and validate the Innovation Telltale, something the Fortune 100 will surely value.

M&A Innovation

Relying on mergers and acquisitions for growth sends a signal that you don't know how to innovate or how to manage it.  M&A has other problems, too.  Companies tend to overpay which actually destroys shareholder value.  At best, firms end up paying full value, neither better or worse off financially.  The firm grows in size, not value, and pays in the form of distraction.

What if you could use the tools and processes of innovation in mergers and acquisitions?  How could it help?  Would you select acquisition targets better?  Could it help understand the valuation better so you get a better deal?  Might it help you implement better?  I believe innovation techniques could be applied to all three. Here is one example: targeting - deciding who to buy.

Imagine you are the CEO of a bank, perhaps headquartered in Europe.  You and the other board members have decided its time to deliver more value to the shareholders by growing the business. You decide to 
acquire another bank with all the spare cash you have accumulated (rather than just give it to its rightful owners.) The question is: which bank?  Should we buy one in Europe to expand our share while eliminating a competitor?   Should we expand to the U.S. market and buy one there?  Should we buy a struggling bank, get it cheap, and restore it to profitability?

No, no, no. Too simple and obvious.  Nothing innovative here at all.  Let's instead apply the Subtraction Tool from Systematic Inventive Thinking and see how we can re-frame the question.  Start by listing the components of your bank.

1. Employees
2. Customers
3. Assets
4. Property plant and equipment
5. Brand
6. Systems
7. Management

Now, one at a time, let's remove a component, then ask ourselves which bank we should acquire.  Imagine you had no customers. You still have all the other components, just no customers.  What bank could you 
acquire that had the ideal customer base for YOUR bank given what it's all about?  Would you want customers who were more diverse, higher income, more profitable, lower cost to serve, more loyal, etc?  In other words, acquire a bank that delivers the perfect complement of customers.  Now remove employees.  You have all the other components, just no staff.  Now what bank would you buy?  Which has the ideal employee base for who you are?  Would you go after employees who are smarter, less costly, more diverse, younger, older, etc?

The same process, done for each component in succession, gives you a whole new innovative perspective on who to acquire.  It helps you understand why you are buying, what you are getting, and how you 
expect to create new value and competitiveness.  It helps you understand The Bet - what the deal is really all about.

M&A is an expensive way to grow.  By adding the gift of innovation to the process, shareholders stand a better chance of seeing more value.

Social Innovation

Web 2.0 social tools are swelling all around us, and the Fortune 100 are embracing them for two purposes - managing and engaging the internal employee base and managing and engaging the external customer base.  Wikis, blogs, mashups, and social networks will improve productivity, connectivity, knowledge transfer, and ultimately profitability if deployed correctly.

What about innovation?  Can the Web 2.0 environment increase, enable, accelerate, and deepen innovation within companies?  I am impressed with the emergence of tools such as Wridea and others that have taken on the challenge.  But I have yet to see one that works effectively.  I am trying to figure out why.  Are these applications using the wrong innovation tool or process?  Do they have an effective innovation process, but deploy it incorrectly?  Or, are people not using the application in an optimal way?

I experimented with online innovation about five years ago, about the time MySpace was introduced.  I used an online learning platform (eCollege 4.0) with a group of colleagues, and we tried to create new products within the health care space.  We used Systematic Inventive Thinking as the innovation process, and we structured the "event" over a four week period of time.  The goal was to invent new products without ever meeting face-to-face using asynchronous communications online.  I called it O.P.I.E for short - Online Product Innovation Exchange. 

Here is how it worked.  Using simple threaded postings, a member of the group suggested an existing product as a starting point.  Another member took that product and listed the components of it.  Then, each member would select one of the components to work on.  Their job was to use one of the five templates of the S.I.T. method and create a virtual product.  They had to post these virtual products in a separate area of the online site.  Then, other members would review their suggested virtual products and use "Function Follows Form" to envision a viable use or benefit of the virtual product.  It was classic S.I.T. in an online, asynchronous environment.  The result?

O.P.I.E. was a miserable failure.  It generated few ideas, nothing really original, and it was frustrating for the participants.  I struggled with why for a long time.  Was it the wrong process, people, or platform?  As I have learned more about social media and Web 2.0 and how people really use and experience this environment, I am beginning to understand why.  All three aspects of O.P.I.E. - the process, people, and platform - needed some modification for this to work effectively.  Here is what I would do differently.

For social innovation to work, the platform has to be optimized for this purpose.  I had used a platform that was intended for traditional online learning, and it lacked the tools to properly facilitate the exchange and touchpoints needed for innovation.  The optimal platform needs to do a few things better.  For example, the site needs to notify other members when a virtual product has been posted.  With O.P.I.E., too much time elapsed in the asynchronous mode, and members were not sure when to login to check what was going on.  Other members would get frustrated because nothing seemed to be happening.  If members were notified, Twitter-like, that a new virtual product was available, they could engage the process more efficiently and all at once to create a flurry of ideas for discussion.  Secondly, the site needs to allow richer descriptions of virtual products.  This could be done either visually where participants somehow draw the virtual product, or audibly where participants leave a short, recorded description on the site for others to hear, either online or via their cell phone.  This would promote a richer response in the form of innovative uses and benefits of the virtual product.

What about the process and people?  I am still working on this, but I believe changes are needed in both.  The inherent flow of innovation is correct within the S.I.T. method, but I wonder if there are perhaps certain templates that are better suited for the online environment.  Also, there needs to be more work done in how the process is facilitated online and how expectations are set for the participants.  What components do they work on?  What virtual products do they respond to? How many ideas do they generate?  How many other ideas do they attempt to modify or improve?

Social innovation is promising.  It will reduce the cost of innovation and the time commitment allowing companies to innovate more often.  But the big win is the same as what many other Web 2.0 applications bring - it will greatly expand the numbers and diversity of participants.  This will yield more original ideas and innovations than ever before.