Author Archives: Paul

How to Create an Innovation Investment Strategy That Puts Your Company’s Resources Where They Count

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From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.

When Lou Gerstner took over as CEO of IBM in 1993, he issued a directive that shook the research world to the core. Gerstner ordered that IBM’s research activities, which had once tackled big, hairy problems like quantum computing and holographic storage, would now be focused on solving customer problems. Success would be measured less on standards of innovation than on a project’s success in delivering products to market.

Gerstner’s move wasn’t popular at IBM or anywhere that basic science was done. But it helped IBM live to fight another day. It would be hard to argue today that IBM is any less innovative as a result.

People sometimes take a hands-off approach to investing in innovation, presuming that creativity takes freedom and money. But if you look at companies that are truly innovative – Apple, 3M, Southwest are good examples – you don’t see massive R&D budgets. What you do see is focus. Those people who don’t know where to start investing have not looked at the Awin Report, so if you haven’t read it yet, go now!

3M has been making Post-It notes for more than 30 years and continues to lead the market against a raft of competitors. There are people in that company who are laser-focused on improving and extending the product line into new applications. 3M delivers a constant stream of new Post-It products, which keeps its competitors in constant catch-up mode. 3M won’t allow them to compete.

Apple has carved out a distinctive and profitable niche in personal computing because it is focused on delivering a wonderful customer experience. Apple’s products are beautiful to behold and to use, and this focus enables Apple to continue to sell profitable proprietary products in a sea of white box discounters. Apple is focused.

Southwest does three things well. Its planes leave on time. They arrive on time. And passengers get their luggage quickly. This focus on addressing the most important aspects of a customer’s flying experience is the main driver of Southwest’s success. Everything the company does, from its route network to its open-seat boarding system, is driven by the goal of getting customers to their destinations as quickly as possible.

Technology companies, especially successful ones, often abuse their innovation investments. They either presume that success in one market presages success in another (which it rarely does) and so go off chasing rainbows. Or they pour resources into reinventing the wheel. Digital Equipment Corp. executives admitted sheepishly at one point that the company funded as many as 30 different project teams working on the same problem, each with their own set of ideas and approaches. Is it any wonder that such companies sometimes crash and burn in spectacular fashion?

Investing in innovation is about saying “no” a lot more than it’s about saying “yes.” In my experience, innovative companies constantly streamline their investment decisions to get to the core of what they really do well. But they invest aggressively in those projects that are fundamental to the business. As long as the business doesn’t get marginalized by a new technology, they do just fine.

Teams should constantly reality-check their efforts to be sure they’re on track to deliver value to the business. Xerox Palo Alto Research Center (PARC), the innovation incubator that 30 years ago invented so many of the IT tools we use today, was a classic case of innovation without application. The team at PARC had lots of freedom and money. They pushed the limits of computer design but worked for a parent that had no plan for packaging their discoveries. Their work benefited countless companies that came after them, but it never benefited Xerox.

You probably don’t have the luxury of being a test lab for your industry. That’s why your investment strategy should be to fund generously a few projects that have high value potential. It’ll force you to say “no” a lot, but you’re more likely to live to fight another day.

How Technology Advances Can Assist An Organization in Staying On an Innovative Path

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From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.

How does your organization handle the arrival of new information technology? Do you bar the doors, hoping it’ll go away? Or do you eagerly welcome the newcomer, start working on a master adoption plan and create a preferred vendor list?

Neither approach is ideal. New technology is seeping in to organizations all the time. Some of it turns out to be useful, but a lot doesn’t. Or at least it isn’t useful at first. Technologies like handheld computers, local area networks, wireless networks, online services, storage networks, modular servers and even fax machines took years to mature from their early iterations. Businesses that made early commitments to those technologies ended up spending more to rip out and replace them that they would have spent if they had waited.

One truism about new technology is that we rarely know at the outset how useful it will be. Cellular telephones, for example, were initially a way to make phone calls. How many people could have predicted in 1995 that Americans would send 45 billion text messages by phone a decade later? Or that the phone would emerge as the preferred device for mobile computing?

There is no one way to adopt new technology. The approach that works best for you is one that meshes with your corporate culture. Some organizations eagerly latch on to new ideas, even though they know they’ll stub some toes in the process. At the other extreme are the folks at the lagging edge. They’re the skeptics who wait until technology is proven in the market and then wait another year after that before making a move. They’re boring. And often ridiculously profitable.

What’s more important than speed is your process. The best thing you can do is have your ear the ground so you know what people are already using. Remember that the vast majority of useful new information technology comes into organizations through the back door today. Individuals try something, like it and just start using it. Word of mouth spreads the news and pretty soon IT organizations have a problem: large numbers of employees using disruptive new technology in a completely uncoordinated and unmanaged fashion. It’s happened time and time again and it’s going to continue to happen.

Smart organizations get out front of this trend. They have ways to spot new technologies that are creeping in to the business, isolate them and assess their value. Some set up technology labs and stock them with the latest toys that they loan out to enthusiasts.. Others have technology evaluation committees that meet regularly to review what technologies people are bringing into the office and how to accommodate them. Still others are willing to tolerate a certain amount of chaos on the assumption that innovation will flourish if employees are given freedom to experiment.

What’s important is to realize that new technology increasingly comes into use long before the IT organization is prepared for it. There’s no one approach that will get this dynamic under control. You need an evaluation process that fits with your corporate culture and that is broadly understood by the people on the front lines.

How to Encourage Innovative Thinking in Your Organization

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From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.


If you ask most corporate executives whether they value innovation, their answer would almost certainly be an unqualified yes. After all, innovation ranks right up there with motherhood and the American way as a core value. But if you look at how those same executives are evaluated at bonus time, it’s typically on the factors that most discourage innovation: cost-control, risk avoidance and profitability.

Why is there such an imbalance between our objectives and our behavior? In the case of large companies in particular, it’s because cultural values discourage risk-taking, which is the soul of innovation. We may give lip service to being innovative, but come review time, we tend to base evaluations on successful completion of objectives, with the emphasis on “successful.” Failure is considered a negative, but failure is intrinsic to innovation. In my view, if less than a third of your new initiatives don’t fail, you’re not trying hard enough.

I’ve seen a few characteristics common to many organizations that I’d define as innovative.

The leadership takes risks – If employees see company leaders avoiding unpopular decisions and always taking the “safe” route, they will quickly learn to emulate that behavior. Innovative companies are willing to pursue untested ideas, even if the odds are against them. And they’re not afraid of admitting failure if they thought the idea had potential. In my experience, leadership example is the most important factor in creating an innovative culture.

They value individual achievement – While everyone recognizes the importance of teamwork, the reality is that innovation flourishes when individual employees are given the leeway to pursue their own ideas. The issue is not recognizing individual successes, although that often helps. It’s a matter of giving people the satisfaction of seeing their initiative result in meaningful improvement. The more potential a person demonstrates for innovation, the more latitude he or she should be given to realize that potential.

They respect their instincts – In his excellent book Blink!, Malcolm Gladwell describes how a person’s intuitive reaction to an event, experience or idea is very often the best one to follow. Yet many organizations research ideas to death, allowing innovation to die the death of a thousand focus groups. Research has its place, but its principal value is to validate good ideas – or at least identify terrible ones – rather than to tell you what to do. Innovative companies are fast because their leaders trust their instincts enough to take action without waiting for the market to give them the okay.

They shred bureaucracy and streamline approvals – Meetings and committees are the enemy of innovation. They lead to consensual decisions, which are usually safe but unimaginative. Managers need a fast-track process to move promising ideas through the approval process. Committees need tight deadlines and time limits on discussion. The more you talk about something, the less likely you are to act on it. Innovative organizations give leaders the flexibility to shortcut committee approvals.

Their performance criteria recognize innovation – Is there an innovation category on your performance review form? Can an employee get an equally good rating for failing to succeed with a risky project as succeeding with a safe one? Does your employee newsletter celebrate great ideas that didn’t work out or just the ideas that succeeded? If you’re not rewarding risk-taking in your own employees, you’re going to breed a play-it-safe culture.

In coming posts, I’ll elaborate on other factors that make companies innovative. Playing it safe isn’t one of them.