You asked, We Answered: Questions on Innovation

Drop in on the Q&A portion of a recent innovation conference, sponsored by my colleagues at Visagio. I gave the keynote speech about Seeing Around Corners and the criticality of innovation. Here is an excerpt from the Q&A.

Image via Pxhere

What are the risks and benefits of completely changing a business model?

Question:  Many companies are completely changing their business models.  For example, VW announced recently that it is transforming the Group into a software-driven mobility company.  What do you think about this movement? For instance, hardware companies becoming software companies?

Answer:  This is a huge transformational challenge, as a change in business model means that incentives, metrics, KPI’s, power relationships and structures are all likely to have to change.  Our thoughts on the human side of this can be found in the article link below.  It doesn’t mean that transformation is unnecessary – indeed, when you have lost your previous competitive advantage it is essential. It just means that it will be difficult.  

This article, co-written with Valize partner Ron Boire, takes you through the challenges of transformation, what pitfalls might be encountered and some remedies.  

How do we best organize to foster an innovation environment?

Question:  You’ve talked about how to foster an innovation environment. I’ve observed that such an environment is often created in a separate manner within different departments. That makes it very restrictive and causes internal conflict. That said, what do you think is important in this implementation, so this can be done jointly as an ecosystem and not as singular instances?

Answer:  Creating innovations in separate silos is usually a bad idea, and reflects low levels of innovation mastery.  At high levels of mastery, innovation is ‘just the way we do things around here’ and not a separate undertaking from the day-to-day business.  This is a great article by Jeff Bezos on what it takes to think this way. 

Practically, we see organizations on a continuum with respect to innovation mastery. Those who are at the lower end have exactly the problem you are describing – they have not built a capability or proficiency to innovate and are trying to force-fit it into a business designed to deliver today’s products and services. Those at the high end have organization-wide practices (such as making small amounts of resources available for experimentation at the front lines).

At Valize, we have developed an Innovation Mastery Scale Assessment which can tell you where your organization falls.

If you would like to give it a spin for your organization, reach out!

How do we know it may be time to disengage from a business, even if it is profitable today?

Question:  In the “disengagement” part, how can we have indicators or processes that we perceive when leaving or pivoting the business? Who are generally doing well or making good profits? 

Answer:  There are always early warning signs that all is not well, if one is paying attention.  Here are some that you can look for, drawn from my book The End of Competitive Advantage: 

I don’t buy my own company’s products or services

We are investing at the same levels or even more and not getting margins or growth in return

Customers are finding cheaper or simpler solutions to be “good enough”

Competition is emerging from places we didn’t expect

Customers are no longer excited with what we have to offer

We are not considered a top place to work by the people we would like to hire

Some of our very best people are leaving

Our stock is perpetually undervalued

Our technical people (scientists and engineers, for instance) are predicting that a new technology will change our business

We are not being targeted by headhunters for talent

The growth trajectory has slowed or reversed

Very few innovations have made it successfully to market in the last 2 years

The company is cutting back on benefits or shifting more risk to employees

Management is denying the importance of potential bad news

You can watch a video of me describing the process of healthy disengagement here.  

Moving toward Interaction Fields

Question:  Professor Rita, You have said about industries and businesses shifting from selling products to selling interactions and you mentioned John Deere as an example, could you please explain more how they are doing it and what are the main concepts that we can take from it? Do you have any material (papers, articles) about it that you can share with us?

Answer:  A great book on this is Erich Joachimsthaler’s book The Interaction Field that explains this concept in great detail.  This interview gives an overview.  What he argues is that the swirls of data surrounding products and activities are worth far more than the features and functions of the activities themselves.

I personally believe that we are in the midst of a major transformation of how we will produce, consume, and create, along the lines of Carlota Perez’s thinking in her work on technological revolutions.  We’re moving into more of a “flow” based economy.  Happy to chat about that further with anyone that is interested. 

How should we be structuring innovations?

Question: Prof. Rita, companies usually struggle defining their organization structure to tackle innovation: independent structure, R&D department inside the organization. What are your suggestions on that?

The first thing to realize is that there is no good option.  You do have choices.  I’ve written a white paper on the archetypes around this, which go through the following options:

1. Locate the venture in a business unit
2. Create an independent division in a business unit
3. Locate it in R&D
4. Locate it reporting to a senior staff role
5. Create an entire New Ventures Division
6. Have it report to the CEO
7. Embed it throughout the organization as a system-wide process

Each have pluses and minuses which I discuss.

I spoke at the Innov8trs “Unconference” on this theme. 

Setting up an early warning system to anticipate inflection points

Question:  How can we develop the skills to predict the inflection points in our leadership?
We used a lot the idea of a data-driven decision, but it is not that simple to just use data to predict the inflection points, how can we balance that, data and assumptions, feelings and other in the decision process?

Answer:  The main challenge is getting people to take the time to look at the early warnings and stay up to date on them.  Data are great, but realize that even with AI, most of what you get in the world of data are lagging indicators, not the leading indicators that would be useful to anticipate the future.  

I outline a process you can use to do this in Chapter 2 of Seeing Around Corners, where I would refer you – basically, define a “time zero” event that signals that the inflection point has arrived and work backward to find leading indicators. Then make sure someone has the responsibility to keep an eye on them and establish tripwires when certain signals are sufficiently strong to convince yourself that the time is right.  

Let me know if you enjoy tapping into this Q&A format – it seems a nice way to tap into what is on people’s minds at the moment.