Executive surveys by global consultants show that a wide gap separates the companies that only come up with sparse and sporadic innovations and the enterprises that astutely manage an innovation-portfolio. (1) The latter continuously develop their innovation-capabilities while the former are unable do to so and will lag further and further behind.
The management of an innovation-portfolio is driven by the business-strategy, and, therefore, it is actively supported by the senior management. So, we have a troika consisting of the strategy, the senior management, and the innovation-teams with their innovation-projects. I put the senior management in the center because it has to steer and/or support the innovation-teams. Their task is not easy.
Firstly, innovation-projects can be quite dissimilar; thusly a standardized approach does not work too well. Secondly, innovation projects can be very expensive, not just financially but also by tying up precious resources such as the time of the talents. Thirdly, the results of innovation-projects on the web of the strategic resources of the organization can be very difficult to foresee. Particularly the intangible assets - such as the morale of the innovators – are hard to assess. Nonetheless, innovation must go on, it just has to be well managed in order to put the money and the talents where the enterprise can expect best chances.
In this short paper, I will discuss the 3 strategic dilemmas the innovation-managers face. I call them -1- the features vs. the failures -2- the first vs. the ultimate -3- the financials vs. the fitness.
-1- The features vs. the failures
The progress of technologies is impressive. It enables companies to innovate expansively on the features of their products. However, engineers may focus on the technology and on the features in disregards of the benefits the customers may get from those features. (2)
Eventually some products such as the electronics become so complex that they escape comprehensive control. Years ago the CEO of a major computer manufacturer told me that there were so many features in their products, that all these features interacted with one another, and, that as a result, they were hard put to check if all these connections worked properly.
“The machine that changed the world” has some hick ups. (3) Car manufacturers are now recalling unprecedented number of cars. One car manufacturer, known for its mastery of Total Quality Management, had to recall over one million cars, and it had to face substantial claims because some of their cars caused fatal accidents.
We have two cars, different models made by the same prestigious manufacturer. My wife’s automatic gearbox failed and it had to be reprogrammed in the first year; my car’s automatic gearbox failed. It had six years, and the electronics of the gearbox had to be replaced. The above repairs were very expansive.
The first dilemma of the innovation-management: do we have more features than really needed to boost the benefits that the customers really recognize ? are all these features safe or are we risking too many failures, and a negative impact on our brand-value ?
-2- The first vs. the ultimate
“I’d rather be first than perfect” Howard Schulze, CEO of Starbucks
Time is money, and innovations may take a long time from start to break-even. Well, let us differentiate between radical innovation and evolutionary innovation.
Revolutionary innovations that benefit of the full support of the leadership are generally they are not submitted to constant questioning and to extreme time-pressures. The innovation-teams are pretty much left alone in their secret hideout. However, revolutionary innovations are few and far in between.
The competitive pressures are at high point on the evolutionary innovations. Some of the knowledge concerning the technologies, the operations, and the marketing are readily available to all the players. So, “the first to the future” can expect competitors to nibble at its heels, ready to come up with some tricks of their own, and quick to harp on the problems other entrants may show up.
Unlike revolutionary innovations that look like a marathon, evolutionary innovations are like a sprint to try and blanket the market. What would happen if we put surgeons on a time-sheet ? What happens if we push the innovators to meet a tight time-schedule ? What are the risks of fickle failures if we push our talents too hard to come up with an interesting evolutionary innovation ?
I bought a cheap smart phone from a well known of the many smart-phone producers. The product was really not that smart, and it was substituted 6 months later with another cheap smart-phone from the same manufacturer at the same price. The first product was in my opinion a dismal disappointment; the second was okay for the price. I am probably an odd customer as most would not have bought another cheap smart-phone or any smart-phone from that manufacturer. Again, evaluating the risk of stumbling when running too fast is not easy, and evaluating the impact of product disappointment on the brand-value is not easy either.
-3- The financials vs. the fitness
Last year, Prof. C. Christensen made a presentation on the dilemmas of the management of innovation. He distinguished between (1) the “empowering innovations”, which substantially decrease the price of the product, thusly enabling a larger number of customers to purchase a product that previously they could not afford (2) “sustaining innovations”, which improve the product so as to make “a good product better” (3) the “efficiency innovations” that cut the costs even further. # 1 is one of the different types of radical innovation, # 2 an evolutionary innovation, and # 3 an incremental innovation.
According to Christensen, the “efficiency innovations” are cash-cows that should be milked, while the others consume cash and should be neglected. This author considered that smart business-leaders should focus on the “efficiency innovations” that entail less risk, and that are financially more attractive.
As I understood his presentation, which I saw on a video, that approach would lead to a self-restraining cycle of innovation. In my referenced paper (4) I disagreed with Christensen, and the practices of the innovation-leaders like Apple, Samsung, Google follow a virtuous cycle of innovation also seem to squarely contradict Christensen’s theory.
In a nutshell, taken from my aforementioned paper # 12, which can be downloaded from my site www.willysussland.com , hereafter some essentials of virtuous cycle of innovation.
Firstly, spreadsheets only show financial figures, which do not capture the intangible resources. Thusly, they miss the essentials of both the enablers and the results of innovation! This brings to mind Albert Einstein’s seminal axiom “Sometimes what counts cannot be counted, and what can be counted doesn’t count”.
Secondly, it is rare that - as Christensen suggests - an innovation-cycle starts with sweeping innovations such as the <empowering innovations> because such projects require competencies concerning the management of the < total value-chain> that novices rarely have. (21) It can happen that – out of the blue – an inventor comes up with a radical invention. But, unless it is supported by a highly competent organization, the invention will merely produce disappointing results for the inventor … and excitement for the followers that have the wherewithal to bring the goodies to market. The history is chock full of examples of inventors coming out empty-handed.
Thirdly, Christensen seems to underestimate the fact that technology, global competition, and the changing attitudes and aptitudes of customers compel organizations to get on, to constantly develop their innovation-capabilities, and to keep outperforming with innovations so as not to fall in <the blue ocean> of scorching competition. (6)
The financials are merely one approach to gauge the fitness of an organization. It is more effective looking at the past and on the tangible resources than at the future potential that the enterprise can achieve with its intangible resources in order to sustain success.
Business-strategy looks at the best way for the enterprise to optimize risks-rewards-timing. As applied to the management of innovations, the strategists are confronted with dilemmas such as the 3 aforementioned ones.
1. W. A. Sussland “The Innovative Enterprise” second edition Create Space 2014
2. B. T. Gale “Managing Customer Value” The Free Press 1994
3. J. P. Womack & D. T. Jones & D. Ross “The Machine that Changed the World” McMillan 1990
4. W. A. Sussland “The virtuous cycle of innovation and how to manage it” paper # 12 for download on www.willysussland.com
5. W. A. Sussland “The Totla Value Chain” paper # 21 for download on www.willysussland.com
6. C. W. Kim & R. Mauborgne “Blue Ocean Strategy” HBSP 2005