How to Innovate Your Corporate Business Function


Disruptive Innovation is as relevant to internal business functions like HR, Legal, and Finance as it is to breakthrough technologies, products, and services.

 

 

Last year I spoke at Disney.  The company wanted me to teach their high potential leaders the ins and outs of breakthrough innovation.  Awesome.

But the end of the session something surprising happened.  A participant walked up to me and said, “disruptive innovation is great, but what does it mean for me and my function?  I’m in Human Resources.”

And that’s the problem.  ”Innovation” today is almost exclusively about products, services, and business models.

Most companies enlist R&D and product development groups to find the next big thing that grows the business and creates competitive advantage.  So if you’re sitting in HR, Legal, Finance, Marketing, or other internal functions, finding “disruptive innovation” can feel like a daunting challenge.

One of the best examples of what’s possible comes from the legal department at DuPont. Here’s an excerpt from my book, Leapfrogging:

With sixty-thousand employees in ninety different countries, not to mention a huge variety of products in everything from agriculture to electronics to clothing, the volume of legal work needed to keep DuPont’s operation going is utterly staggering. Patent law, tax law, employment law, contracts, antitrust, intellectual property, class action defense – a company like DuPont simply cannot survive without lawyers, lots and lots of lawyers.

By the early 1990′s, the company’s then-associate General Counsel, Thomas Sager, knew that things had gotten out of hand. At that point, more than 350 law firms were working on DuPont’s dime.  The sheer number of lawyers and their lack of coordination weren’t the only problems Sager identified. There was also a troubling disconnect between the company’s interests and the interests of its legal advocates. For the law firms, everything was about billable hours. That meant, no matter what, they wanted to fight cases to the bitter end. If one of DuPont’s products or the way the company was doing business were truly causing harm, Sager reasoned it would be more profitable to change that product or that business practice rather than litigate the matter for years and years. But the law firms working for DuPont would never recommend such a thing because it would mean less revenue for them.

Sager knew he had a mammoth project on his hands. He also knew that he wanted to do more than just cut costs – he could run his function like most other corporate legal departments, or he could create a new model that would push his own comfort zone, a model that would ensure that his department became a core contributor to the strategic operations of the business and even influence the operating models of the dozens of firms working for DuPont. 

And here’s how he did it.

First, Sager reduced the number of law firms that were working with DuPont. The ones that remained were strategic partners.

Second, he changed the method in which the law firms were paid to a structure that encouraged the firms to solve problems faster.

And, in an effort to remove the stigma of law only being an “old boy’s club,” Sager also made diversity a priority when choosing which law firms to retain as partners. DuPont now has programs and job fairs dedicated to recruiting more women and minorities.

Sager essentially disrupted the legal department.  He challenged assumptions.  He saved the company millions.  He reinvented the corporate legal business model.  He anchored his actions in business results with a greater purpose.

So how do you start to innovate your corporate business function?

1.  Identify longstanding assumptions that constrain what’s possible (e.g., we pay for external legal services by the billable hour).

2.  Determine the desired business results without worrying about these constraints (e.g., we need to resolve cases 10 times faster and at much lower cost).

3.  Brainstorm list of new operating assumptions (e.g., what if we pay incentives to quickly resolve cases?)

4.  Try it out (e.g., test the idea as a pilot project to work out the kinks)

Today, many companies mandate “innovation” across the enterprise.  Internal business functions can be as “innovative” as the products and services their companies provide to the market.

How as your own internal business function innovated?  How have you challenged assumptions?

 

Silicon Valley’s Secret and other Resources

 

Secret


What’s Silicon Valley’s secret?  How do you become #1 out of 30,000?  How do you create a culture of innovation?  Simple questions with complex answers.


These resources will help you leapfrog to your next big thing…

 

Silicon Valley isn’t just a spot on a map. It’s a brand–a global symbol of enduring innovation. Today, companies can create a culture of value creation no matter where they’re based.
Soren’s Rabble Rouser:  “Location, location, location” isn’t what it used to be
Source:  FastCompany

Learn about Google’s amazing job screening criteria and hiring strategies
Soren’s Rabble Rouser:  School is overrated
Source:  New York Times

 

How to Innovate a City
See what New York has done to its “High Line” and how it has transformed the city
Soren’s Rabble Rouser:  Breakthroughs come from the other side of the tracks
Source:  FastCompany

One of the reasons that only about 1/3 of all Fortune 1000 companies have formal innovation metrics is because this simple question does not have a simple answer.
Soren’s Rabble Rouser:  You get what you measure
Source:  InnovationExcellence

There are 30,000 bistros and cafes in Paris.  This little gem is #1.  Here’s how they did it.
Soren’s Rabble Rouser:  Mix great product, business model, & purpose – Voila!
Source:  YouTube

 
 

Crucial Innovation Strategies for 2014

 

Breakthrough

 

As we move into 2014, we must remind ourselves about what we already know while keeping on eye on what’s changing.  Doing so can make the difference between disrupting and being disrupted.

 

When I originally wrote this article for FastCompany, I wanted to highlight several present day realities:

  1. The world is changing – and innovating – faster than ever
  2. Many companies continue to fall into well-known innovation traps
  3. Disruptive innovation requires that we look outside as well as inside at our assumptions, capabilities, and (increasingly outdated) organizational models

Here’s a summary of my original article with my top three favorite strategies…

 

2013 was a banner year for innovation.  Twitter went public.  3D printing went mainstream.  Tesla turned a profit.  Start-up money flowed.

So what did we learn last year that we might apply and extend into the next?  Here are three strategies for keeping innovation flowing and the business growing.

1. Cannibalize yourself.
2013 saw the bankruptcy of a global brand and innovation icon.  Kodak invented the digital camera in their Rochester labs. But the company sequestered the technology from the start, fearing it would lead to the demise of film.  It did.  It just wasn’t Kodak who commercialized and then capitalized on the disruptive innovation. They viewed themselves as a “chemical company” to their dying end by holding onto film while they struggled to get into the saturated inkjet printer market.  Don’t view killing off profitable products as a problem.  If you don’t eat your lunch and reinvent yourself, someone else will.

2. Simplify life for customers, not yourself.
A couple of years ago Netflix announced that its DVD rentals and streaming video service would separate into two distinct offers. Sure, dividing up its two business models would make life easier for the company internally.  But customers hated the idea since they had to split their existing subscription into two and pay for each separately.  Netflix listened and apologized. Outraged customers returned in 2013 and Wall Street responded (the company’s stock jumped almost 300% last year).  The lesson:  Keep things simple for customers even if it means absorbing the complexity.

3. Solve “unsolvable” problems.
Tackling small problems leads to incremental innovation.  Focusing on seemingly insurmountable challenges inevitably lead to solutions that create new categories and markets.  TruTag Technologies’ edible bar codes, introduced last year for example, address the growing pharmaceutical counterfeiting crisis in developing countries – and the World Economic Forum selected the company as a Technology Pioneer to watch in 2014.  Incremental thinking rarely changes the world.

Not all of 2013’s lessons were new, a commentary itself on the state of innovation (as Blockbuster,  Borders Books, and Blackberry for example can attest).  As we move into 2014, we must remind ourselves about what we already know while keeping on eye on what’s changing.  Doing so can make the difference between disrupting and being disrupted.

 

What other innovation and strategic leadership lessons did 2013 teach us?  What’s do you think are the imperatives for 2014?


Here’s the original version of the article

5 Strategies for Nonprofit Innovation

SOSNonprofits face a fundamental “business” challenge:  they’re “nonprofits.” Most of the 1.5 millions US nonprofits don’t support themselves through “competing” or creating better products, services, or business models.  They fundraise, get donations, and find grants.

Historically, the typical nonprofit business model has been based on dependence.  Dependence limits innovative thinking.

Social business is gaining steam.  The Old Skool Café in San Francisco, for example, delivers a 1940’s supper club experience that includes great food, music and service – all delivered by and in support of at-risk youth.  And earlier this year, New York’s Mayor Bloomberg doled out awards specifically recognizing the city’s most innovative nonprofits.

But here’s the challenge: most nonprofit innovations come from socially minded start-ups that invented themselves from scratch.  So what do the rest of the 1.5 million do?

Running a nonprofit today means reinventing existing business models – by acting like a business.

Imagine taking on three of the toughest challenges in America – homelessness, drug addiction, and HIV – all at the same time.  Now imagine the amount of work and dedication that would take, not to mention money.  And now try to imagine doing all of that, and turning a “profit” too.  I put the word profit in quotes because New York-based Housing Works, which manages to do everything I just described, is technically a charity operation. But it acts an awful lot like a business. And a very successful one at that.

In an era when most nonprofits are cutting back, largely because they rely on private donors and government funding, New York’s Housing Works is expanding. It just opened subsidiaries in Haiti, Washington D.C., and Mississippi.  Since Housing Works opened in 1990, an estimated 20,000 people have benefited from its work, and that number continues to grow, thanks to the company’s pioneering “social enterprise” approach.

If Mother Teresa had earned an MBA, she might have turned into someone a lot like Housing Works’ co-founder Charles King. King and his late partner Keith Cylar opened Housing Works’ first thrift store in Manhattan in the mid-90s. This was not your typical Salvation Army-style second hand shop. King and Cylar’s surprising approach began with the idea that thrift stores don’t have to be dingy caves with bins of unwanted scrappy clothes. In fact, they did not accept all, or even most, donations. Only the highest-end goods were allowed in.  “We see ourselves as the Barneys of thrift shops,” King once said.

That first location was so successful that Housing Works soon opened another outlet to handle the demand, and then another, and another still. There are now ten Housing Works thrifts around the city. In 2009, the company expanded to Brooklyn. The new store across the East River made a million dollars in its first year – in the midst of the recession.

By hosting upscale events like fashion shows and celebrity clothes auctions, King and the rest of the Housing Works team have turned the thrifts into must-visit attractions. W Magazine once hailed the stores as the “hottest” in the city, “the place where the city’s fashionistas drop off last year’s Prada and Comme des Garçons.”

The organization has built prestigious brands for its other moneymaking enterprises as well. It recently hired well-known chef Michael Sherman to design the menus for its cafe and catering businesses. Famous writers give readings at a Housing Works-run bookstore. And big time music acts like Bjork have performed at Housing Works benefits.

All told, Housing Works’ social enterprise investments yield a quarter of its $43 million yearly budget. Most of its other revenues come from fee-for-service contracts with the government. Housing Works model seizes control of its future while ensuring its ongoing role in change the world for the better.

Any nonprofit can reinvent itself and its business model.  Here are five strategies for doing so:

1. Think like a business.  Assume your funding will dry up within the next  year.  How would you self-fund your activities?

2. Redefine “customer.”  In addition to those you serve, consider who could become a paying customer.  Who has money that would buy something you have to offer related to your world-changing mission?

3. Package up offerings.  Think creatively about what you “sell,” whether a product, service, event, or experience.  What could you do to add value to people’s lives (that they would pay for)?

4. Don’t go it alone.  Innovation is about partnerships.  What are the for-profit companies that could provide you with resources or revenue in return for positive press or promotion from working with you?

5. Create a sustainable business model.  Measure your organization like a business. What percentage of revenue will come from revenue-generating activities, and how will this evolve over time?

In today’s challenging times, not making a profit doesn’t mean not thinking like a business.  Nonprofits leaders who want to change the world know they must change themselves and their organizations in the process.

Use the “Surprise Factor” for Viral Innovation

Surprises

Infuse the unexpected into everything you do for customers — and deliver a continuous stream of positive surprises.

__________________________

When I ask business leaders, students, or friends to think back on their favorite experiences with what they consider truly breakthrough new products or services, many can’t help but smile.  The range of things I’ve heard when I’ve asked the question is immense:  iPads, Disneyland, Diaper Genies, Facebook, snowboards, rollerblades, Zappos, the Swiffer, Etch A Sketch, Crest White Strips, the Amazon Kindle, Skype, the University of Phoenix, MTV, eBay, Segway scooters, Harry Potter books, and the list goes on.

There is a reason for their Cheshire Cat grins. They’re reliving the pleasure of being surprised.  Not the kind of surprise when our older brother jumps out from behind a door and scares the crap out of us. It’s the opposite kind of surprise – the kind that signals delight, appreciation and intrigue.  When we experience a positive surprise, it compels us to do three things:

  1. Want to experience more of it
  2. Learn about how or why it works the way it does
  3. Share it, so we can take a small amount of credit for others’ own smiles of surprise.

When things give us a positive jolt of surprise, we embrace and share them.  It’s not just about recommending a new product.  It’s also about what makes things go viral.

It turns out that there is a physiological basis for these types of positive responses. Our brains are built to like the “pleasingly unexpected.”  Two neuroscience researchers, Gregory Burns and Read Montague, discovered this fact in a pretty interesting way.

Burns and Montague convinced some unsuspecting research subjects to join them for a drink – in their lab.  Their subjects were first hooked up to an MRI machine to measure their brain’s “pleasure centers.”  This is the part of the brain that’s responsible for pleasurable feelings. It lights up like a slot machine when people take addictive drugs or anticipate receiving money.  Once Burns and Montague connected their subjects to the MRI device, they asked them to open wide, just like they might do at the dentist – though what came next wasn’t painful.

The participants hadn’t been told what was going to happen, so no one knew that a computer was about to squirt water or juice into their mouths!  Half of the people received water; the other half got juice.  To further segment their research subjects, half of the people in each of the water and juice groups received their drinks at regular, predictable intervals while the others were continually surprised through random, sporadic squirts.

Burns and Montague presumed that people’s brains would respond most positively to their preferred beverage.  But they found that it didn’t matter whether their subjects’ wanted water or juice.  Across the board, the brain’s pleasure centers were most activated in those who received unpredictable, random squirts, regardless of the beverage they were given.

These two researchers pinpointed the fundamental mechanism behind why we perceive breakthroughs as special: we’re wired to appreciate positive surprise.

Whether it’s iPads, Netflix, or Cirque du Soleil, most of us recognize breakthroughs when we see or experience them because our brains are set-up to appreciate the way they challenge assumptions while adding value to things we care about.

Want to innovate? When creating and testing your ideas, incorporate and measure the “surprise factor.”  Ask yourself:

  • What unexpected benefits, features, or experiences would delight your customers?
  • To what degree does your product, service, or business model elicit positive surprise?
  • What do your customers say or convey as the most surprising elements of your solution?
  • What surprises you about your customers’ reactions?

Positive surprise…  It’s the source of radical innovation and viral customer delight.

 

4 Rabble-Rousing Resources for Innovating the Soft Stuff

 

Leading innovation is about recognizing the importance of formal and informal rewards, communication through storytelling, and giving people freedom while providing just the right amount of structure.

Here are four rabble-rousers from the last few months that will give you an edge:

 

6 Ways to Create a Culture of Innovation

Gain insight into six ways to cultivate your own unique system for innovation for your organization

Rabble Rouser:  I couldn’t agree more (well, I did write it)

Source:  FastCompany

 

9 Rules for Stifling Innovation

Learn what  Rosebeth Moss Kanter says about how to kill innovation

Rabble Rouser:  Killing things is easy.  Creating them isn’t.

Source:  Harvard Business Review Blog

 

Getting Past the Innovation One-Off

See what local governments are doing to foster sustainable innovation

Rabble Rouser:  Isn’t “government” & “innovation” an oxymoron?  Not anymore.

Source:  Bloomberg

 

How to Inspire a Culture of Innovation (through Design Thinking)

Learn what Mauro Porcini, Chief Design Officer from PepsiCo, says about fostering innovation through instilling “design thinking” throughout the organization

Rabble Rouser:  Design thinking is great, but don’t forget about execution!

Source:  Entrepreneur

 

Forget Brainstorming. Use Painstorming for breakthrough innovation.

(download the Painstorming Template)

 

Beautiful sad girl with hurt finger


Most brainstorms fall far short of breakthroughs.  Painstorming provides the focus and insight to leapfrog to the next big thing.

________________________

Brainstorming is today’s no-brainer.  Most leaders and organizations preach it and teach it.  It’s about generating lots of ideas, deferring judgment and then – for savvy innovators – using some type of meaningful criteria to winnow down the laundry list.

Here’s the problem: We often don’t realize we’ve got great ideas for a misguided focus until it’s too late.  A Fortune 500 client of mine once said, “We’re great at executing on bad ideas.” Most of us are absolutely awesome at coming up with creative solutions to the wrong problem.  But as the saying goes, “Garbage in, garbage out.”

What’s the solution?  Painstorming.

Painstorming is the process of uncovering pain points to drive breakthrough innovation.

Instead of jumping to solutions, Painstorming uncovers the fundamental drivers of new opportunities.  No more innovating around the fringes of the problem.

Here are the steps:

  1. Person – who’s the specific person or customer you’re innovating for?
  2. Activities – what are the everyday things they do, why, and to what ends?
  3. Insights – what are the processes, tools, or activities that they unnecessarily do or have invented themselves to “work around” the way things are “supposed” to be done?
  4. Needs – what are the biggest pain points that are the root causes of the customers’ problems, unmet needs, or desires? What are the workarounds, things that cause stress or concern, dissatisfaction, or anything else that’s responsible for their “pain”?

Here’s a simple template for plotting pain points (click image to enlarge or click these links to download PDF or MS Word versions):

Screen Shot 2013-06-19 at 9.05.57 AM

With this, you’re ready to heal your customers’ pain.  Jump back into brainstorming and generate options for solving individual or multiple pain points through new products, services, processes, and business models.

Painstorming solves one of the biggest pain points in the innovation process itself.

Create Your Company’s Culture of Innovation

 

When FastCompany published 6 Ways to Create a Culture of Innovation, within the first few days the article received over 2000 tweets from FastCo’s page alone.

Why such keen interest in this topic?Innovation Culture

Many leaders and organizations have finally recognized that real innovation isn’t about creating finely tuned processes, using new fangled methodologies, or creating 2×2 matrices.  Rosebeth Moss Kanter essentially argued this a few months ago in her Harvard Business Review blog.

More and more of my clients are telling me that “we have plenty of ideas, we just can’t get traction with any of them.”  They’re stuck.  The reason:  their company cultures stifle innovation.

I recently spoke about this very challenge at the Human Capital Institute.  The 300 HR managers in the audience raised their hands in agreement when they were asked if “the soft stuff” was their company’s biggest barrier to innovation.  The problem is that it’s really, really difficult to mix up just the right recipe of a culture that truly supports and fosters innovation.

Here’s a succinct synopsis of the six strategies for creating a culture of innovation:

  1. Be intentional with your innovation intent – Frame the way you want to change the world and make it about the customer.
  2. Create a structure for unstructured time –Provide employees with  “unstructured” time to explore and tinker.
  3. Step in, then step back – Provide tools that give guidance and structure, but let employees decide how best to use and apply them.
  4. Measure what’s meaningful – Because “you get what you measure,” select metrics that reinforce your innovation goals.
  5. Give “worthless” rewards – Don’t just recognize people through formal awards, but rather promote recognition everyday through informal interactions.
  6. Get symbolic – Understand that mission statements, awards, stories of successes and failures, posters in the hallways, catch phrases, and acronyms all shape culture.  Create your own symbols that reinforce innovation values.

The soft stuff truly is the hard stuff.  Which is why I also recently posted a new tool I created for culture design called The Culture of Innovation Canvas.

Anyone can fill out a checklist, complete a PowerPoint template, and design an ideal type model.  While strategies and tools are still important, navigating the dynamics of organizational culture is increasingly being recognized as the most critical success factor for business success.  And those who learn to curate culture to support innovation will become the stewards of the future.

Want more detail?  Check out the original version of 6 Ways to Create a Culture of Innovation.

Breakthrough Innovation for Associations

quebec

Today I spoke to over 100 executives as part of the American Society of Association Executives Leadership Forum.  The venue:  Quebec, Canada.  The topic:  Breakthrough Innovation.

When I asked the audience how many of them have experienced disruptive change in their markets and organizations, every hand in the house went up.

In addition to sharing thoughts from my recently published article 6 Ways to Create a Culture of Innovation, I also shared the Intuit Catalyst Toolkit, a resource that the software company encourages everyone at all levels and in all functions to use to innovate.  I provided the story of the nonprofit HousingWorks, which revolutionized the nonprofit thrift store model by creating stylish destination stores with the unique look of a designer boutique.

Even though associations aren’t “for profit”, they can (and should) innovate like anyone else (however they decide to define innovation).

Emerging technologies and market shifts have disrupted many organizations, and associations are no exception.  The flip side of any threat is opportunity. Associations have the opportunity to innovate, and it starts with these questions:

  • What is the game changer that gives us our raison d’etre? (I had to throw in the French since we are in Quebec after all)
  • What are the metrics of success that will shift behavior and reinforce innovation?
  • What pilot projects can help get our feet wet through experimentation?
  • How can we push the thinking and boundaries of our staff by exploring new member needs, markets, trends and business models?
  • How can we create a true culture of innovation?

Change is everywhere and impacting everyone.  Disruptive innovation isn’t just for companies like Apple and Netflix.   Whether you’re a membership association, professional society, visitors’ bureau, or tourism board, the burning platform is the same:  to disrupt or be disrupted, that is the question.

 

 

The Culture of Innovation Canvas – Design Your Innovative Organization

Fresh Idea
This week is the Front End of Innovation conference in Boston, which is arguably the most renown event for corporate innovation professionals.

Here’s my presentation on Strategies and Tools for Creating a Culture of Innovation.

In this presentation I introduce the concept of the Culture of Innovation Canvas, a simple tool (download PDF or download PowerPoint) for defining the following dimensions of an organization’s innovation culture:

  • Leadership – How leaders influence innovation through explicit decisions and subtle behaviors
  • Processes – How growth strategies and innovation are executed internally and externally including functional and cross-functional processes, customer engagement, information sharing, product and service development, and other activities
  • Structure – The formal and informal organizing principles and functional designs that enable (or inhibit) collaboration and guide mindsets & behavior
  • People – The mindsets and skillsets of employees, leaders, external partners and even customers tied to creative thinking, prototyping, and execution of new ideas and opportunities
  • Metrics, Rewards & Recognition – The mindsets and skillsets of employees, leaders, external partners and even customers tied to creative thinking, prototyping, and execution of new ideas and opportunities
  • Technology – Capabilities and tools that allow employees, external partners and customers to connect, share knowledge, and innovate

And here are some of the resources and tools that I reference on creating a culture of innovation:

Intuit’s Innovation Catalyst Toolkit

Building Blocks of Innovation (MIT)

KEY Creativity Climate (Harvard)

LEAPS Innovation Leadership Competencies

All companies, whether they are successful with innovation or not, have one thing in common: they have their own “personalities.”  These personalities are their unique organizational cultures – the shared experiences, values, norms, assumptions and beliefs that shape individual and group behavior, and that (for better or for worse) ultimately impact their business success.

The most innovative companies pull the right levers to create a culture that leads to exploration, experimentation, rapid prototyping, and the innovations that surprise the market, create competitive differentiation, and drive growth.  That’s where real “leapfrogging” comes from.