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Report 103
Your newsletter on applied creativity, imagination, ideas and innovation in
business – delivered to your e-mail box on the first and third Tuesday
of every month.
Tuesday, 21 March 2006
Issue 78
Hello and welcome to another issue of Report 103, your fortnightly newsletter
on creativity, imagination, ideas and innovation in business.
As always, if you have news about creativity, imagination, ideas, or innovation
please feel free to forward it to me for potential inclusion in Report103. Your
comments and feedback are also always welcome.
Information on unsubscribing, archives, reprinting articles, etc can be found
at the end of this newsletter.
CREATIVE DESTRUCTION
There is a tendency to think of creativity and innovation as being about –
well – creating things. But, destruction can actually be a very creative
act and lead to innovative results. Creative destruction, of course, is not
wanton destruction. It is calculated, focused and aims to bring results of one
kind or another.
There are three forms of creative destruction:
1. Destruction as innovation
2. Destruction to make way for innovation
3. Destruction of assumptions
Destruction as Innovation
Destruction as innovation is most often seen in operational process innovation.
Streamlining an ordering fulfilment procedure so that it requires fewer steps,
thus making the procedure faster and less costly is a good example of creative
destruction as innovation.
Likewise, removing unnecessary features from a gadget in order to make it easier
to use is a form of destruction as innovation. I do not know the design approach
that went into the iPod. But its sheer simplicity suggests that there may well
have been a project manager destroying suggestions of additional control switches
and functionality.
Creative destruction as innovation can lead to a higher level of customer satisfaction.
Recent Dutch research has shown that half of all electronic gadgets returned
to the shops in the USA are not defective. The returned gadgets are simply too
complex for consumers to figure out. So, they return the gadgets to the shop
and demand their money back instead. According to Elke den Ouden, who performed
the research as a part of her thesis at the Eindhoven University of Technology,
the average American consumer will spend no more than 20 minutes trying to determine
how a gadget works. If she does not succeed – she sends it back.
So, manufacturers would do well to start taking buttons, switches and unnecessary
controls off their gadgets now and start focusing on core, easy to use and understand
features.
Creative Destruction to Make Way for Innovation
Creative destruction to make way for innovation is the equivalent of tearing
down a rotting old house in order to put a brand new house up in its place.
Destruction for innovation is also often seen in operations. Dropping an old,
inefficient process in order to replace it with a newer, more efficient process;
such as replacing a filing cabinet with a web based database that can be accessed
by any computer terminal within the firm, is an example of destruction for innovation.
The filing cabinet is destroyed to make way for the database.
Fuel cell powered cars are a good example of destruction for innovation. The
fuel cell powered car destroys the very concept of a piston engine and replaces
it with a fuel cell powering relatively small electrical motors at each wheel.
The fuel cell can be in a variety of shapes, such as a long, flat container
at the bottom of the car, and the engines take up little space. As a result,
the fuel cell powered car frees designers to completely rethink the shape and
functionality of the motorcar and provides them with the opportunity for a level
of innovation not seen in the automotive world since the early years of the
last century.
Indeed, when the time comes to upgrade your product or service, it is sometimes
better to destroy the existing version and start afresh. Doing so leaves much
more room for improvement than simply adding new features. It also requires
that you re-evaluate the core functionality of your product or service.
And if you think destroying your existing product completely and redesigning
it from scratch is too costly an exercise, ask yourself this: what if your competitors
were redesigning their product from scratch – in order to out-innovate
you – right now?
Destruction of Assumptions
Destruction of assumptions is about ridding your mind of assumptions about
your product, your customers or your market. For example, although Polaroid
invented the digital camera back (for attaching to studio cameras), they missed
out on commercialising their invention. That's because they assumed photographers
would not be interested in digital imagery unless they could quickly print quality
pictures. It never dawned on the people at Polaroid that photographers might
be happy to look at images on computer screens and not need to print those images
immediately. As a result, Polaroid is not a big name in digital photography
these days.
I wrote about Destroying Your Assumptions in depth in Report 103 in July 2004
(you can read the article here: http://www.jpb.com/report103/archive.php?issue_no=20040713),
so I shall not go into it in this article, except to say that it is important
to review your assumptions about your customers, market and products on a regular
basis. And destroy those assumptions that no longer stand up to reality.
INNOVATING FOR WHOM?
To what extent does an employee work – and innovate – to benefit
the organisation and to what extent does she work and innovate to benefit herself?
Senior managers would like to believe that employees are a team of selfless
workers who – in exchange for a monthly wage and odd benefits –
work exclusively to the benefit of the organisation. As the organisation grows,
the employee receives promotions, salary increases and additional benefits that
encourage her to continue serving the company 100%.
The socialist cynic might argue that employees work solely to benefit themselves.
Their interest is not in the organisation's prosperity, but in their salary
and benefits. Workers do as much as necessary to ensure their salaries and regular
promotions, but no more.
The truth, of course, falls somewhere in the middle. In most organisations,
employees take pride in their employer, share in its vision and genuinely wish
it to prosper. At the same time, employees want to maximise their benefits via
not only salary, but taking on interesting responsibilities and acting in ways
that benefit their progression up the organisational ladder.
Clearly, from the organisational perspective, the greater the extent to which
employees work for the organisation's benefit, the greater the benefits to the
organisation. This is important in terms of innovation. If employees strive
to help the organisation grow, they will strive to devise and implement ideas
that will help the organisation achieve that goal.
On the other hand, if employees feel disconnected from their firm and feel
they gain no personal benefits from firm's growth, they will keep their heads
down, keep new ideas to themselves and avoid rocking the boat.
In other words, if your firm is to be an innovative firm, then you need to
maximise the extent to which your employees are working to the organisation's
benefit rather than to their own benefit. While this may sound rather like programming
people to become mindless company cogs whose only interest is the organisation's
growth, the opposite is actually true. If employees believe in their organisation
and strive to help the organisation achieve its corporate goals, they are likely
to become more satisfied employees who feel they are an integral part of the
organisation and that they are appreciated by the organisation.
Achieving this is easy in concept:
1. Sharing goals. If employees understand your corporate goals and how they
can do their bit to help the organisation achieve those goals, they will do
their bit. Thus, you need to communicate goals across the organisation. Managers
must work with their teams to ensure each member knows what her bit is. Sharing
goals is the single most important thing you can do to get employees working
for the organisation's benefit
2. Ensure that if people help the firm grow, they also grow with the firm.
This should be company policy and be well communicated. If an employee knows
that her efforts on the organisation's behalf will result in greater responsibility,
promotion and increased salary, then she will work to the organisation's benefit
– because that benefit will come to her as well. During the dot-com boom
in the late 1990s, start-up companies were able to pay talented employees very
low wages together with promises of stocks and massive wages when the organisation
prospered. Unfortunately, most companies did not prosper for long and employees
today are more cynical of packages with little salary to start with, in exchange
for riches should the organisation do well.
3. A charismatic leader can do wonders to bring employees over to the organisation's
side and entice them to strive on the organisation's behalf. Provided the charismatic
leader does not make false or excessive promises, she can be very effective.
However, if employees eventually feel cheated by a charismatic leader who promises
– explicitly or implicitly – benefits that never come, employees
will soon turn against that leader and her organisation.
This is a problem for government offices whose success does not usually result
in growth and profits, and whose success is not measured financially. A civil
servant does not strive to turn her government office into a more profitable
enterprise.
Unfortunately, as a result, many civil servants work primarily for their personal
benefit – doing what is demanded of them and little more, keeping their
heads down and not rocking the boat. Nevertheless, a manager of a government
office can still push employees to work on the government's behalf in the same
ways that a manager of a private company can. However, a means has to be found
for demonstrating and measuring the organisation's success.
So, why are your employees working for you?
SOME 65% OF CEO'S PLAN TO RADICALLY CHANGE THEIR COMPANIES
IBM's researchers have been busy looking at innovation recently. The IBM Global
CEO Study 2006 is based on in-person interviews with more than 750 of the world's
top CEOs and business leaders. The results are interesting to those of us who
make a living out of innovation.
“The study found that CEOs are looking beyond growth through new products
and services. They are increasingly focused on innovation in their business
models and operations as key mechanisms for driving change.
“Indeed, CEOs stated that approximately two-thirds of their efforts are
now targeted at business model and operational innovation. Furthermore, fully
61% of CEOs who have a primary focus on business model innovation fear that
changes in the business model of a competitor could likely result in a radical
change to the entire landscape of their industry.”
This is critical. The world's most innovative companies have not achieved their
success solely through the introduction of new products and services. Rather,
the bulk of their innovation has been through innovative operational efficiencies,
improved processes and making those products and services better than their
competitors can.
The world's most innovative car manufacturer is a prime example. Although Toyota's
cars are not the sexiest in the world, Toyota's endless striving to improve
their cars' quality and increase manufacturing efficiency – such as through
just in time delivery of parts – ensures that Toyota is consistently one
of the world's most profitable companies and their cars are trusted for reliability.
Interestingly, 76% of CEOs list business partner and customer collaboration
as top sources for new ideas. In the past, CEOs were more likely to look to
R&D for those ideas.
And companies that collaborate with partners and customers do benefit. “Companies
with higher revenue growth report using external sources significantly more
than slower growers do. Outperformers used external sources 30% more than underperformers.
Additionally, CEOs stated that the top benefits from collaboration with partners
are: reduced costs, higher quality and customer satisfaction, access to skills
and products, increased revenue, and access to new markets and customers.”
For more information, go to http://www-03.ibm.com/press/us/en/pressrelease/19289.wss.
Commercial: Jenni idea management software service allows you to involve not
only your employees in your idea management process, but also your business
partners and customers. For more information about Jenni and how it works, please
visit http://www.jpb.com/jenni/.
Or, if it's easier just
send me a message or telephone me...
P&G'S NEW INNOVATION MODEL
Harvard Business School Working Knowledge has a fascinating article on P&G's
new innovation model. Worth reading at http://hbswk.hbs.edu/item.jhtml?id=5258&t=innovation&iss=y
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Happy thinking!
Jeffrey Baumgartner
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