STRATEGY INNOVATION→INNOVATION STRATEGY
Curt Deckert ---April 24, 2007

It seems that in many companies, strategy making is reserved for top management. Often this "strategy making" consists of following an industry's rules, traditional marketing, or generally accepted industrial practice. There are now more attempts to work toward integrating more people in an organization into an overall strategy process to bring new life to innovation in all functions of business.

Strategy Innovation

 Management guru Gary Hamel (Fortune magazine labels Gary Hamel “the world’s leading expert on business strategy.” and The Economist calls Hamel “the world’s reigning strategy guru.”) has said that, "strategy innovation" has replaced "total quality" and "business re-engineering" as new business trends. Years ago the trends were re-engineering and reinventing their supply chain, but now he says it’s time to reinvent the management processes. In his elaborations on how firms ensure a deep-rooted capacity for strategy innovation, he suggests development of increased passions in employees to engage and capture the imagination of every single individual instead of top management setting strategic direction.
 (Since 1983, Hamel has been on the faculty of the London Business School where he is currently Visiting Professor of Strategic and International Management. At present, Hamel is leading an effort at the London Business School to build the world’s first “Management Innovation Lab.” The Lab is a pioneering attempt to create a setting in which progressive companies and world renowned management scholars work together to co-create “tomorrow’s best practices” today. The goal: dramatically accelerating the evolution of management knowledge and practice.)

I believe this is necessary in order to capture as much useful input and to obtain agreement for efficient team effort. Because of international competition, I think we need to integrate the total innovation process including business models, intellectual property (IP), and technology into the total business strategy. This is one way of integrating an effective innovation team internally, but we also need to think about global interactive innovation beyond traditional company lines. Today it often necessary to team up with international vendors, suppliers, or other companies in manufacturing and distribution channels to meet global competition and markets. Here new business models including supply chains will need to be developed to serve customers in new ways.

One consultant that has had a lot of impact on modern innovation thinking is Tom Peters. He wrote In Search of Excellence , published in 1982, wherein he proposed solving business problems with minimum C-level effort and empowering decision-makers at multiple levels of a company. Early on he predicted that we will have to scramble to reinvent ourselves, as we did when we came off the farm and went into the factory. Then we need to work toward creation of new value in meaningful ways. This should include technology models integrated with business models in an overall strategy with intellectual property (IP). Because of global competition, the time is now for companies to become more creative in strategy innovation so innovation strategy can thrive.

“Tom Peters has probably done more than anyone else to shift the debate on management from the confines of boardrooms, academia, and consultancies to a broader, worldwide audience, where it has become the staple diet of the media and managers alike. Peter Drucker has written more and his ideas have withstood a longer test of time, but it is Peters—as consultant, writer, columnist, seminar lecturer, and stage performer—whose energy, style, influence, and ideas have shaped new management thinking."
 (The Bloomsbury Press book Movers and Shakers: The 100 Most Influential Figures in Modern Business – 2004-The summary entry on Tom's impact)

Early on, Tom Peters has written about IDEO, one of the more creative, innovative product development organizations in the world today. He comments that IDEO, who has had clients asking for product advice and their way of innovating, has transferable methodology. "Routine is the enemy of innovation," declares Kelley, IDEO’s general manager. IDEO was honored as "Innovation U." by Fortune and lauded as "the world's most celebrated design firm" by Fast Company.  Its work on over 3,000 new product programs, has resulted in a creative cutting edge system that keeps clients and their customers happy.  IDEO has won more awards in the last ten years than any other design firm. Kelly’s book, The Art of Innovation, provides insights and tools companies need for competitive innovation. It seems to provide a core system for competitive R&D for most organizations.

Strategies connecting strategy innovation with innovation strategy involve such issues as “lead” or “follow” in technology and/or business models. This is put a different way in Making Innovation Work by Davila, Epstein and Shelton where they talk about “Win” or “Not Lose.” Both concepts can affect how innovation is approached with respect to technology, business models, and IP. They talk about how risk and reward influence the management process of getting new products to market. For example, technology leadership requires considerable support from the top to provide adequate resources from throughout the organization with realistic funding and scheduling. “Follower” strategies can allow purchase of existing IP requiring less internal innovation. All approaches have to be evaluated with respect to risk over time. With international competition increasing, one is encouraged to increase innovation at all levels. A balance between outsourcing and hiring will depend on internal capabilities, technologies, expected need for special processes and tooling, and the overall business model.  Along the way it is necessary for management to set up realistic milestones based on a clear vision of the market requirements and objectives and new opportunities for increased applications of competitive business models, IP, and technologies.

Innovation Strategy

Kelley at IDEO believes everyone on their teams is creative so a key goal is to tap into the vast creativity among employees at all levels. We agree with IDEO in some of their basic innovation methodology such as:

Developing a climate of innovation, flexibility, and camaraderie requires flexible management skills that take into account the creativity of people. Here teamwork is basic to company success.  For example, it has helped IDEO earn the most Industrial Design Excellence Awards over the past decade. To do this, IDEO fosters an atmosphere allowing freedom to express ideas, throwing out most standard rules, and allowing people to design their workspaces and environment to fit each person. The founder of IDEO, David Kelley, believed in hiring people he liked and respected to help create this environment so everybody would have fun getting more work done.

 People using solutions from unrelated products or fields or Cross-Pollinators, as Kelley notes, look far from standard solutions, industries, and countries to adapt related technologies. Here widely diverse teams of people mix and matches ideas and technologies to drive growth. They need to have a sense for the holistic nature of innovation and the evolution of ideas that can achieve an advantage in your product area.

For example, brainstorming at IDEO is practically a religion. Often playful, brainstorming as a tool –or as a skill – is taken seriously. In a company without many rules, IDEO people set sixty minutes as an optimum length because the level of energy required is hard to sustain at a high level. It is the opportunity for teams to "blue sky" ideas early in a project, provide an idea engine, solve tricky problem, and gain a sense of opportunity.

Anthropologists, those who observe human behavior, play a key role in product development.  Typical IDEO-designed products are inspired by watching real people not just use focus groups or traditional market research. Kelley says to “Start by following your customer journey, breaking it down into component elements, and asking yourself how you can deliver a better experience." They go to the actual people who actually use the product or something close. This observation-fueled insight of how potential customers really use the product helps improve innovation by determining what comes natural to people.

Being willing to take some risks at the early stages of development may require a leap of faith or a “Hurdler” who surmounts innovation obstacles. This often requires people of diverse disciplines who look for ways to overcome the present limits and challenges. For example, people at all levels need to be given some freedom to take risks in order to accept a new product or marketing approach. Feasibility studies should identify supply chain and production cost problems before product planning and investing in prototypes.

Goal setting for each phase of work must be realistic and allow for new approaches to be updated with new information. Management of innovative breakthroughs requires focus on teams to provide some guidelines for their constant give-and-take. This takes management willing to share ideas and trust in the group process to meet realistic innovation goals. For example, IDEO and others do not believe in the lone genius working toward great ideas in isolation. We need to take into account the total process.

The Experimenter prototypes potential products as soon as good concepts emerge. At first he might fail as he tries new things to increase the rate of enlightened trial and error. Because you learn so much from prototypes, and assuming you can run those customer and functional experiments quicker and cheaper than others in your industry, you can accumulate more insights and convert them into value at a faster pace. Finding problems early in the program allows more rapid product development and more certainty when make investments into tooling. External R&D sources should be used when internal resources are not adequate or when there is a definite market window that has to be met. When results are looking promising one should get more production and sustaining engineering people in order to transition into production.

Look beneath the surface of many great business successes, and you're likely to find a trail of failures that preceded them. Describing the painstaking trial-and-error process that led eventually to the creation of the incandescent light bulb--and General Electric--prolific inventor Thomas Edison said "I have not failed. I have merely found 10,000 ways that won't work." Many people would have given up, but Edison had the heart of The Experimenter. Henry Petroski, in his classic book To Engineer is Human, says that in his field, failure is almost a prerequisite for success, because only by reaching a point of failure can you define the limits of possibility. I am not sure I would interpret that idea literally for business ventures, but I do know that lots of stellar successes are built directly on a series of small failures. British entrepreneur James Dyson reports that he built 5,127 prototypes of his cyclonic vacuum before getting to one that was commercially successful. That dedication to the Experimenter role is truly extraordinary, but so was the reward the now-billionaire Dyson eventually received. At IDEO where I work, we try to maintain a sense of "joyful failure" about quick early prototypes, knowing that learning from those first rough versions will point us in the direction of future successes.
(Fast Company---Posted by Tom Kelley at October 18, 2005 12:00 PM)

Conclusions

Even though all countries in the world have similar pressures to develop new products and markets, some of the international competition such as Japan is more willing to look farther into the future. Making sales and profit for the current quarter or year that affect the stock market may be important over the short term, but we need to consistently innovate for the future. Japan, for one, has an incredible history of focus, purpose, hard working people and the ability to draw on international knowledge. For example, Kelley tells his clients in consumer products to go to Tokyo to see the future.

One key ingredient in innovation is LEARNING faster than the competition. There is often a huge base of knowledge in related IP. Related patent and product searches can provide a good initial technical foundation for new innovation. This searching can also identify or confirm market opportunities.

 Learning also involves in intimate knowledge of markets from real customers plus incorporating current and future technology models into the business model. Small disruptor companies that steal market share with new developments that result in new IP can and do surpass large established corporations. New money will go to the swiftest-moving competitor because the rate of change leads to increased profits.

In some cases risk may be required to open new markets. An initial narrow market focus may allow testing a market before going international. This can help minimize the financial risk. To remain competitive we need to continue to build momentum in innovation at all levels from small private to larger corporate to political at high levels. Even innovation done with national sponsorship needs to continue to build up technology to stay competitive. One key challenge of the 21st century is to go beyond present product and service applications to more diverse thinking to compete on an international scale.