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Posts Tagged ‘Innovation’

The core concept of innovation is doing something in a way that has never been done before. It’s about embracing and even initiating change with the expectation that the result will be advantageous to you.

One of the basic foundations of any market or industry is that it operates on a set of rules. These rules dictate that companies within a market make choices and consequently, sacrifices. The necessity of choice in systems is basis for the entire discipline of economics.

The beauty of innovation, of doing something in a way that has never been done before, is that it can change the rules of a market and thus render the requirement of choice and the pain of sacrifice unnecessary.

History is littered with examples, including the invention of the assembly line. Manufacturers used to be faced with the choice between quality and quantity. If they chose the quality of expertly hand crafted high quality products, then they were forced to accept the high labor cost and inefficient, low output manufacturing process that went with it. If they chose the quantity of efficiently and cheaply produced products, then they were forced to accept the low quality and unreliability of the manufacturing process that went with it. The evolution of the assembly line rendered this choice between quality and quantity unnecessary. By focusing on the specialization and repetitiveness of tasks in the assembly process, assembly lines allowed for relatively cheap labor to efficiently produce reliable, relatively high quality products. This game changing innovation completely restructured the manufacturing industry and allowed the early adopters of the new technique to set themselves apart from their competition and thrive in the new environment they created for themselves.

In today’s financial services industry, banks can no longer afford to continue playing by the established rules of the game. The need for new, innovative approaches supported by enabling technology is paramount. Banks seeking to break away from their competition and create a new, opportunity rich environment for themselves need to seek out innovative technology vendors whose solutions can break the current operational trade-offs that define today’s industry.

If you are an individual or a small team not yet operating as a business, starting first on business model innovation sounds like it’s impossible. The world is full of long-standing companies that seem to be serving virtually every conceivable need.

However, can you serve those needs by employing new business models in a better way? Probably you can. And if you can, then you can be the first to compete based on business model innovation.

Notice that business model innovation usually requires more mental agility than resources, so the playing field is either level or may be slightly tilted in your direction. As you work on business model innovation, pay attention to closing the competitive door behind you with impossible-to-duplicate advantages, though, so that others cannot leapfrog past you if you want to enjoy the ultimate competitive advantage from business model innovation.

Let’s consider an example. Commercial art schools had been operating for decades when Education Management started out in 1969 by purchasing the Art Institute of Pittsburgh.

How could the company be first with an improved business model in other geographic markets where commercial art was already being taught by for-profit schools and by tax exempt public or private colleges and universities?

What Education Management did was to focus the commercial art learning process on the needs of employers. In doing so, the company knew that it would also better serve the needs of students by making it easier for them to get, hold, and make career progress in commercial art jobs. To make this adjustment, Education Management made seven changes in the commercial art school business model:

(1) continually define, update and add to the curriculum around employers’ current and future needs, and actively involve employers in the curricula development process through participation in local curricula advisory committees and in special subject panels

(2) employ faculty who are working professionals for career specific subjects

(3) build the curriculum to concentrate on what students need to learn

(4) create facilities and technology specialized to facilitating learning about the professional career environment

(5) help graduates get jobs

(6) reach out extensively to potential students become aware of these educational and career choices.

(7) acquire and rapidly convert small local art and culinary schools into the Education Management business model though substantial investments, and installing detailed planning and information systems to manage those operations according to the Education Management business model.

With this new business model, Education Management could become the first commercial art school in a geographic area to offer greater diversity of education programs in the art, design, and culinary fields, with a superior faculty, facilities, technology, and job market outreach. Note that the business model could either be used to shift the direction an existing school that was acquired (like the Art Institute of Pittsburgh had been) or to start a new school from the ground up.

Copyright 2008 Donald W. Mitchell, All Rights Reserved

Most companies claim to put innovation at or near the top of their corporate agendas, but many of them constrain themselves from delivering on this ambition.

They burden themselves with cumbersome processes, which, instead of encouraging and liberating creativity, constrict it in a virtual straitjacket. There is nothing wrong with processes per se; quite the contrary: good ones liberate people to focus their creativity on innovation itself, rather than on dreaming up ways to deliver it.

My gripe is instead with the way many innovation processes seem designed to catch errors and avoid risk. Even the terminology encourages this: words like Stage Gates, Pipelines and Funnels all sound very mechanical and very constricting. As soon as innovation projects hit problems, the stage gates crash down upon them and the decision makers are quick to pull the plug and avoid wasting resources on these problem children.

Decision-makers often kill off promising ideas too soon because their supporters are unable to produce hard evidence for the business case. It is short sighted to expect data to support the return on investment so early in the life of a big disruptive idea.

A better approach is for the decision maker to tackle his or her role with a different mindset. Instead of acting as The Gatekeeper and slamming the gate shut at the first sign of trouble, they would benefit from reframing their role as Gate Opener, playing the part of problem solver and supporter, and working alongside the team to help them find a way to make otherwise promising ideas work. This requires setting aside an analytical and judgmental mindset and adopting a more creative one as a builder of ideas and a cracker of problems. The decision-maker is usually the most experienced person in the room, but all too often that experience is channeled into the very easy task of saying No. A far greater challenge and better use of their talent and experience, is to play the role of coach and supporter, helping the team find a solution or make the idea even better.

Doing this requires courage on the part of the leader. Saying no reinforces the sense of a leader’s power and influence. It also means risk is avoided and that can be career enhancing in many organizations: if you don’t stick your head over the parapet you won’t get shot. Instead, rolling up the sleeves and getting stuck in to helping solve a problem means you might fail. It can also feel a bit too democratic for some! But doing it will win the genuine respect of the team and gives high return disruptive ideas a real chance of winning through.

This doesn’t mean that the gate should never be shut. If the problem can’t be cracked, or the idea has little merit, then consigning it to the graveyard before too many resources are wasted is the right thing. Nor does it mean that every minor idea should be laboured over when all the indicators show it has insufficient merit. Far better to put it out of its misery and get on with the search for bigger and better ideas.

I am thinking more of high risk, big return, innovations that require courage and mean changing the existing rules of the game. These are the ideas that often get killed off at the first sign of difficulty. “It will never work” “It’s unaffordable”. “Manufacturing I would add complexity”. “We don’t have the capacity to handle this”. “It won’t work in our usual distribution channels”. “It’s very different from what we do now”. If the size of the prize is big enough or the unmet need that this fills is real enough, then it is worth pitching in and trying really hard to make it work. This may well involve completely changing the rules of the game: different routes to market, outsourced manufacturing, extensive testing, remodeling, and bringing in additional brains or external resources to help crack the challenge.

Don’t shut the gate on high potential ideas before you have given them a chance to bloom.

Almost every business has first-aid kits to help injured people recover from accidents. It’s only common sense.

Yet few of these businesses know how to treat a broken business (or strategy) model innovation process. With these questions, you’ll have just the first aid you need to recover from broken processes. Then, you can return your business to health and prosperity.

These questions will help you discover better ways of improving and replacing your business strategy. By using these questions, you should get a better sense of how well developed your business (strategy) model is now compared to the needs of having a large competitive advantage. Understanding those dimensions will give you another helpful perspective on what is good about and what needs to be improved concerning your business (strategy) model development process.

Where has your business (strategy) model created competitive advantages in serving customers?

If you are like most companies, you will find that the strategic model has helped you more with some customers than with others. In fact, a typical company will find that more than 80 percent of its customers get relatively few advantages versus what competitors provide from the company’s strategic model. Thinking about your strategic business model in this way will help you get a better feel for where you can use strategic model innovation to make greater progress.

Where has your strategy model created competitive disadvantages in serving customers?

Whenever a company focuses, one of the purposes of a strategy model, it also chooses to meet the needs of some current and potential customers less well. Sometimes these disadvantages for those customers are unavoidable, but many times they are the result of an oversight or limited thinking. Being aware of who is disfavored in what ways can often stimulate improved business models that enable a company to instead gain advantages with some of these potential and current customers.

What were the original reasons for creating these advantages and disadvantages?

Many times, a srategy model choice fit the current and expected business environment well. But permanently changed conditions can often make such choices inappropriate. A business model innovation process needs to be effective in creating business models that will work well in a broad range of business environments, as well as directing work on creating better strategy models when circumstances change in unanticipated ways that require a response.

Are those reasons for favoring this strategic model still the most compelling ones?

If they are not, you should also think about when changes took place that required a response. The next question follows on to make sense of this observation.

If your company did not make innovations in a timely way to the strategic model, what were the most probable causes of the delay?

You should separate out the issue of not noticing the changed circumstances, from wishful thinking that the new conditions will go away, from not focusing on the strategy model, from not having the skills or resources to work on a new business model.

If you had adopted the ideal strategic model for the time when your current business model was set, what would you have done differently with the benefit of hindsight?

The idea here is to determine if there are any gaps in your strategy model that should have been filled in the past. In most cases, major gaps have been present for a long time. This will help stimulate the focus of your current innovation activities.

How would your business model development process have needed to change in order to have created a more ideal strategy model last time?

Generally, the problems will lie in the area of having too few people thinking about the strategic model, running too few business model improvement experiments, not involving enough people in identifying stakeholder issues, insufficient consideration of different business environments, not preparing those enough who worked on the new business model, and too infrequent business model reevaluations. However, please do feel free to add your own thoughts about weaknesses. This list is just here to help start your thinking.

Copyright 2008 Donald W. Mitchell, All Rights Reserved

The easiest route to creative product innovation is to start with something we already have and ask some simple questions about it to suggest new ideas. For the sake of demonstrating how this can be done, we’ll suppose that we want to design a new kind of bicycle.

We start by asking a lot of questions about the existing product. Along with each of these questions, we ask “What new ideas or possibilities does this suggest?” The following are some of the questions you might start with.

What complaints do people have about this product?

Complaints or “problems” are a great place to start looking for innovation opportunities. In the case of a bicycle, people might complain about the uncomfortable seats, for example, which leads to all sorts of ideas about how to make them better. Maybe buyers could sit on a substance that takes an impression of their bottom, in order to build seats to fit the individual.

What else could be added to this?

What possibilities does this suggest? A “pet carrier” in front of the handle bars comes to mind, with a strap to hold in your cat or small dog. A GPS unit for bicycles is another possibility. A “roof” to keep the rain off of you might work.

Why do people buy this?

Product innovation often comes from asking why people use an existing product, and considering different and possibly better ways to meet that same need or desire. In this case we can guess that people buy bicycles for transportation, to get exercise and, in the case of mountain bikes, for adventure. We can consider each of these motivations in looking for new ideas.

“Transportation” make me think about other forms, like trains, and this immediately brings to mind the idea of a bicycle of sorts that travels on rails very fast from city to city by pedal power alone. “”Exercise” suggests looking beyond stationary bikes and regular bicycling that is limited by season. How about an indoor track that has turns and hills and is designed to make winter biking possible and interesting? Adventure biking suggests speed to me (among other things), and makes me wonder if a spring system, wound by the riders pedaling, could be used for a sudden burst of speed.

What are the various limits involved, and how can they be changed?

A bicycle typically is limited to one or sometimes two people, but what if it could hold twenty? This question suggests a pedal-powered bus that a group of people could travel in. Price is another limit if you want to sell bicycles. Weight is other limiting factor. There is definitely a market fore lightweight bicycles. At the moment light materials are the usual solution, but what about making everything smaller? This also makes the bike easier to store.

There are other questions you can ask to suggest new ideas. “How can I make this cheaper?” for example, is a question that could help almost any new product design be more marketable. “What else do buyers of this item want?” is another good one. And by the way, whether they are good or not, all the ideas above came to me from the questions asked and during the twenty minutes it took to write this. Generating ideas for product innovation is relatively easy once you practice with a few good techniques, like the questioning method outlined here.