Innovation Playbook - Is There An Innovation Glass Ceiling?

I wanted to post the second part of slides today but I am in Chicago this week and have no access to my other Thinkpad. So I will just write about it and follow up with the slides next week.

There are no doubts many barriers to innovation. Or you can say there is a glass ceiling and you hit that ceiling pretty easily. Organizational structure and capital resource allocation process can be considered as hard structural barriers to innovation. Less obvious challenges include the attitudes of people towards risks and accommodating the “misfits” (The best innovators I’ve known are the “misfits”). What stop company from innovating?

Organization Inertia. Discontinuous innovation costs a lot of brain cells for a potentially exciting but uncertain reward. Instead of taking leaps into the unknown it is often easier and more predictable to squeeze a little bit more performance or creating extensions or simply cut cost through consolidation.

Short-termism. The all-pervasive factor is that of short-termism. This is the innovation paradox in which companies do not innovate purposefully or ambitiously, even though they recognize its importance, because of quarterly reporting.

Corpporate Culture and DNA. Companies have not invested in their innovation framework or processes. Innovation framework and best practices are not commonly known and applied.

Open Innovation. An open innovation model opens up the funnel that needs to be adapted to encompass flows of ideas outside an organization. Managers outside the tech world are not trained to exploit external innovations. It can be difficult for a business steeped in the principles of competition to embrace co-opetition. How do you co-innovating with your competitors? The way companies generate ideas and bring them to market has been undergoing a fundamental change. In the old model of closed innovation, enterprises adhered to the following philosophy: Successful innovation requires full control, from generating ideas, product development, manufacturing, marketing, to distribution. For the last 50 years, that model worked well, but not anymore.

Look at what Facebook is doing today. It is the first social networking site to open its operating system to outside developers. At its first public event at the SF Design Center this May, Facebook announced that it will give access to third-party developers like Amazon, Digg, Photobucket and Twitter - to build applications that will be integrated into the new Facebook Platform. Zuckerberg admited that with just some 85 engineers, they can't possibly compete with thousands of developers creating social applications. He also said Facebook will be competing with those guys on a level playing field.

So Google is now trying to beat Facebook at its own game. Be even more open than Facebook ever was. Google announced a new set of APIs enabling developers to build on Google’s socialgraph data. Initially centering around Orkut and iGoogle, the plan could expand on to the other Google Apps including Gmail and Google Talk. I think Google Docs and Gadgets will be a major part of this.

Comments

[Rory MacDonald]

Neither Google nor Facebook are to my knowledge (and I would be very happy to be shot down here) Opening their development platform (which is in any case not an OS).

An "open" system is one based on Open Standards and both Orkut and the Facebook Development Platform are based on proprietary standards firmly controlled by the owner - big difference. This is the same as the MOX (Microsoft Office XML) v's ODF (Open Document Format) argument.

Differences may seem trivial but they are absolutely not (no matter how much PR MS and Facebook invest in muddying the waters). If you want collaboration the standard has to be open. This is the difference between the iPhone SDK and Adroid.

As Idris noted when you said he would be wary of developing widgets for Facebook, it is someone else owning your innovation.

More to the point, in all cases we are talking about SDKs and developer platforms not the applications themselves, these are totally locked down. We all know the real value is in there and they are not letting you anywhere near it. They will let you scrabble round on their refuse looking for scraps but that is about it. And if you find something of real value in the rubbish, they are going to steal it back off you anyway.

This is old school embrace extend extinguish dressed up to look like open collaboration.

[Rory MacDonald]

On the idea of organisational barriers to innovation, I can think of two more to add in here:

1). The "I can buy in innovation" attitude: as a large incumbent it is less risky (short term) to act as the senior LP in a large number of VC funds or (if you are really daring) create your own portfolio. Risk is sandboxed away from your main (proven) operations and core brand.

Long term this one can bite you on the arse when someone inevitably beats you to the next category changer/creator.

Which brings us to

2). Fear of cannibalism. Innovation often means creative destruction. Powerful ingrained business units within a large company will fight in their own interest not in the interest of the company. Even at a level above this C level execs might try and suppress risky innovation which jeopardises assured revenue from an established business.

From my experience a lot of it comes down to personal politics in large bureaucratic organisations, the misfits will be seen as dangerous and pushed aside by people who are there to make incremental career moves rather than market changing innovation.

Its quite old now but I recommend "The Atomic Corporation" by Roger Camrass.

[André Galhardo]

I'm reading and also recommend "A Whole New Mind, why right-brainers will rule the Future" by Daniel Pink

An excerpt:

"Businesspeople don't need to understand designers better. They need to be designers."
Roger Martin, Rotman School of Management

[Jeremy Berlin]

You guys are so bang on. This is what everyone faces when it comes to innovation. People need to not only understand design, but also truly appreciate its role in business and our everyday lives.

[L Reiger]

From my experience a lot of it Rory was correct in pointing out that when comes down to personal politics in large bureaucratic organisations, the misfits will be seen as dangerous and pushed aside by people who are there to make incremental career moves rather than market changing innovation. The question what can we do about it?

[Flavio Azevedo]

There were always innovation-misfits in big companies.

The difference today is that it got much cheaper for the innovation-misfit to say "goodbye, boss" and create his own company.

Today´s IT moguls are yesterday´s innovation-misfits.

Big corporations are not the only place to be anymore.

And if you add, as André suggests, a designer to an innovation-misfit ...bang! You´ve got Steve Jobs!

[Rory MacDonald]

Yes this is what Camrass predicted:

Take the growing universe of misfits (small focused dynamic SME/SMB's) allow them to network together to form chains (Company Management - R&D - design - production - sales and marketing , etc. - you get the picture) and they can very quickly rival a product chain within a large corporate.

The large corporates (or at least their McKinsey bean counters/axemen [no disrespect Idris - I assume you have achieved closure on that chapter of your life]) are actually helping the process by encouraging them to outsource important business units such as R&D. They are actually putting the components out there for us. How many large corporates now conduct their own manufacturing (the process from which the corporation as we know it today was born) in house? Most just send off plans to the lowest offer from a group of manufacturing units in China.

The point is, a network of misfits can be made in 10 emails, off the back of one good idea. If the idea doesn't work it evaporates, most people in the chain will have lost very little, as will have had 10 other jobs on the go at the same time. The cost and speed of innovating blows a large corporation out of the water.

I don't believe the world is going to change overnight. There is a lot to be said for the power of incumbency, long established brands, having the funds to buy start-ups well before the challenge you, etc, etc.

But the world is changing and the opportunity is there.