Tuesday, November 04, 2008

It’s No Time to Forget About Innovation

James Yang
Published: November 1, 2008, NYT

This is a very thought provoking article that was referred to me by both Professor James Conley from The Kellogg Sch00l and Denise Fletcher from Affiliated Computer Services. I highly suggest you go back to two earlier postings that discuss efficiency issues for innovation.

"Ambidextrous" companies can handle incremental change and bold initiatives
At 3M, A Struggle Between Efficiency And Creativity

A key message is that although these are VERY difficult times, do not sacrifice the future for once you hit the “stall point” of stagnation, all the data suggests it is VERY difficult to breakout of it.As you will see below, I do not agree with all the comments. I invite your thoughts.

BY its very nature, innovation is inefficient. (I am not sure I like this characterization. Innovation is riskier and more uncertain than initiatives targeted to extend or defend the current business but, because of this, they must be managed differently to be efficient—“Manage the cost of failure, not the rate of failure”. The above two posting deal with this in more detail) While blockbusters do emerge, few of the new products or processes that evolve from innovative thinking ultimately survive the test of time. During periods of economic growth, such inefficiencies are chalked up as part of the price of forging into the future.

But these aren’t such times. Wild market gyrations, frozen credit markets and an overall sour economy herald a new round of corporate belt-tightening. Foremost on the target list is anything inefficient. That’s bad news for corporate innovation, and it could spell trouble for years to come, even after the economy turns around.(This just emphasizes the importance of using the right processes for managing uncertainty)

“To be honest, we had a problem with innovation even before the economic crisis. That’s the reason I wrote my book,” says Judy Estrin, former chief technology officer at Cisco Systems and author of “Closing the Innovation Gap.” “We’re focusing on the short term and we’re not planting the seeds for the future.”
In tough times, of course, many companies have to scale back. But, she says: “To quote Obama, you don’t use a hatchet. You use a scalpel. Leaders need to pick and choose with great care.”
There are important things managers can do to ensure that creative forward-thinking doesn’t go out the door with each round of layoffs. Fostering a companywide atmosphere of innovation — encouraging everyone to take risks and to think about novel solutions, from receptionists to corner-suite executives — helps ensure that the loss of any particular set of minds needn’t spell trouble for the entire company. (I do not necessarily agree with this simplistic statement. There are many models that companies are experimenting with to drive innovation. Secondly, there are many functions within a company that demands processes like Six Sigma where you do not necessarily want these folks taking risks.Refer to the "Ambidextrous" companies can handle incremental change and bold initiatives" posting)

She suggests instilling five core values to entrench innovation in the corporate mind-set: questioning, risk-taking, openness, patience and trust. All five must be used together — risk-taking without questioning leads to recklessness, she says, while patience without trust sets up an every-man-for-himself mentality.

In an era of Six Sigma black belts and brown belts, Ms. Estrin urges setting aside certain efficiency measures in favor of what she calls “green-thumb leadership” — a future-oriented management style that understands, and even encourages, taking risks. Let efficiency measures govern the existing “factory farm,” she says, but create greenhouses and experimental gardens along the sides of the farm to nurture the risky investments that likely will take a number of years to bear fruit. (Refer back to the postings highlighted above)

“I’m not suggesting you only cut from today’s stuff and keep the future part untouched,” she says. “You have to balance it.” (This is critical. Although easier said than done, leaders must try to maintain their business renewal efforts while meeting their current requirements. Look at taking “the scalpel” carefully, not just pruning initiatives that may not bear fruit immediately but are required for renewal. Try to prioritize within each category – defending the base, extending it, and renewal.)

Yet even that approach has its drawbacks. Companies that create silos of innovation by designating one group as the “big thinkers” while making others handle day-to-day concerns risk losing their innovative edge if any of the big thinkers leave the company or ultimately must be laid off.

Innovation has to be embedded in the daily operation, in the entire work force,” says Jon Fisher, a business professor, serial entrepreneur, and author of “Strategic Entrepreneurism,” which advocates building a start-up’s business from the beginning with an eye toward selling the company. “A large acquirer’s interest in a start-up or smaller company is binary in nature: They either want you or they don’t, based on the innovation you have to offer. The best way to foster innovation is to create something, put it to the test, build a good company and then get it under the umbrella of a world-renowned company to move it forward.”
David Thompson, chief executive and co-founder of Genius.com Inc., based in San Mateo, Calif., says that innovation “has a bad name in down times” but that “bad times focus the mind and the best-focused minds in the down times are looking for the opportunities.”

“You do have to batten down the hatches and reduce expenses, but you can’t do it at the expense of the big picture,” Mr. Thompson adds. “You always have to keep in mind the bigger picture that’s coming down the road in two or three years.

“The last thing you want to do with innovation is just throw money at it. It’s a very tricky balance.” (refer to the blog postings from above)

In fact, hard times can be the source of innovative inspiration, says Chris Shipley, a technology analyst and executive producer of the DEMO conferences, where new ideas make their debuts. “Some of the best products and services come out of some of the worst times,” she says. In the early 1990s, tens of millions of dollars had gone down the drain in a futile effort to develop “pen computing” — an early phase of mobile computing — and a recession was shriveling the economic outlook.

Yet the tiny Palm Computing managed to revitalize the entire industry in a matter of months by transforming itself overnight from a software maker into a hardware company.

“Our biggest challenge right now is fear,” she says. “The worst thing that a company can do right now is go into hibernation, into duck-and-cover. If you just sit on your backside and wait for things to get better, they’re not going to. They’re going to get better for somebody, but not necessarily for you.”

HOWARD LIEBERMAN, also a serial entrepreneur and founder of the Silicon Valley Innovation Institute, says innovation breeds effectiveness. It’s not about efficiency, he argues. “Efficiency is for bean counters,” he says. “It’s not for C.E.O.’s or inventors or founders.”(I would counter this comment a bit. There are VERY efficient tools to manage projects that are highly uncertain. The key, as discussed in the early blog postings noted above is choosing the right process. We cannot afford to do innovation inefficiently)
The current economic downturn comes as no surprise to him, he says, because it mirrors the downturn at the time of the dot-com bust. Then and now, the companies that survive are those that keep creativity and innovation foremost.
“Creativity doesn’t care about economic downturns,” Mr. Lieberman says. “In the middle of the 1970s, when we were having a big economic downturn, both Apple and Microsoft were founded. Creative people don’t care about the time or the season or the state of the economy; they just go out and do their thing.”

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