Entries in innovation (20)


What can design firms teach us about innovation and product development?

Manuel Sosa, an associate professor at INSEAD, wrote an interesting piece this week on the concept of design as an innovation catalyst for incumbent product companies.

He reviews the case of Samsung, a company that instituted a successful turn-around in the mid-90's when it began collaborating with design firms and created an in-house design school. How did Samsung leverage design in the process of rejuvenating its business?
Many firms developing new products or services carry out insighting, ideating, and iterating, so what sets design firms apart?
Design firms place a greater emphasis on setting a direction than adhering to organizational silos, and focus on shaping creative ideas to serve practical requirements.  Looking at the methodology these firms employ, Sosa identifies three distinct phases:
  1. Aligning process and organisational elements to encourage user-centricity when insighting
  2. Fostering the generation of many and distinct ideas during ideating, and
  3. Celebrating the creation of rapid and cheap prototypes during iterating.
Sosa argues that the challenge for businesses is to align their internal structures and processes to produce their own versions of insighting, ideating, and iterating in a way that does not disrupt the efficiency of their internal operations.
-- Segundo Saenz


Fear of disruption, changes in demand driving corporate VCs?

A November article in the Economist looked at the drivers for the recent growth in corporate venture capital (CVC) activity, noting that a broad range of companies (from 7-Eleven and Boots to BMW and Citigroup) are making investments in startups. 

Setting up VC arms is a way to identify life-threatening changes to their business early, so that they can adapt or, better yet, get in on the act, says Ben Veghte of America’s National Venture Capital Association"

It's clear there has been a surge in this area: the number of CVC units worldwide has doubled to 1,100 over the past five years, and that 25 of the 30 firms making up the Dow Jones Industrial index have one. What's up for discussion and debate are the drivers for this growth. Some view the rising CVC activity as a bubble driven by available cash and a hot IPO market that is likely burst -- as previous CVC booms have done.

Others see new elements: a desire to make strategic investment in new companies that align with corporations' long-term strategies, and a fear that their current businesses could be disrupted by these same class of startups. And there is the lure of faster, less-expensive innovation that these small, agile companies could provide (compared to internal R&D).

What's your view -- will the trend continue? And what's the best purpose for corporate venture capital investments?

-- Segundo Saenz


What Andrew Hargadon teaches us about innovation

Many organization strive and struggle to innovate in order to grow (or stay alive). “Innovation” is arguably among the most popular and durable semantic fields in the business vernacular. We have to admit nevertheless, innovations that measurably affect their ecosystem (organizations, consumers, etc) are not as frequent and easy to produce as we would like.  Andrew Hargadon's excellent 2003 book, How Breakthroughs Happen: The Surprising Truth About How Companies Innovate, gives us a number of powerful insights into the mechanisms involved in successful innovations:

  • They are not “inventions”, they usually leverage decade-old technologies
  • They are not heroic breakthroughs, they usually involve a heterogeneous network of people and organizations
  • Innovation is, according to Hargadon, a phenomenon that emerges when we are able to form new relationships between objects, ideas and people -- effectively combining previously unrelated capabilities and technologies. "Innovators are no smarter, no more courageous than the rest of us – they are simply better connected. They find ways to exploit the networked landscape”. The many examples in this book and articles illustrate this phenomenon in a very compelling way.

So where does this take us? This is arguably Hargadon’s most powerful and practical contribution: he goes on to codify the profiles (“nexus”) and capabilities (“nexus work”, “technology brokering") needed to improve and organization’s ability to innovate. This basically aims at taking advantage of the patterns that seem to be consistent symptoms of successful innovations (see above) and build the mindsets and capabilities to provoke and nurture them.

Behind Hargadon’s work, there are decades of keen observation of the major innovations (from penicillin to the iPhone). It is also a powerful practical extension of the Actor-Network Theory (Bruno Latour, Michel Callon, John Law, etc), an approach to social theory and Science and Technology Studies. This theory supports the interpretation of major change as emerging network phenomena, providing a solid, fertile framework to understand and (attempt to) manage complexity for businesses faced with innovation challenges.

It is also a humbling framework as it flies in the face the the hero inventor and breakthrough success as the result of individual prowess.

You can read a short paper outlining Hargadon's thoughts on how breakthroughs happen here. His 2000 HBR article on Building an Innovation Factory, written with Robert I. Sutton is also of interest (and features the images, below).

-- Yassine El Ouarzazi


Experimentation in business

In order to understand what works and what doesn't in business, it's best to test and measure--to experiment--and apply what you learn. Thomas Davenport's 2009 HBR article "How To Design Smart Business Experiments" is an excellent primer on some of the challenges as well as the benefits of conducting sound experiments.
Davenport summarizes his findings as follows:
  • Too many business innovations are launched on a wing and a prayer—despite the fact that it’s now reasonable to expect truly valid tests.
  • Companies that equip managers to perform small-scale yet rigorous experiments don’t only save themselves from expensive mistakes—they also make it more likely that great ideas will see the light of day.
  • With a small investment in training, readily available software, and the right encouragement, an organization can build a “test and learn” capability.

To these, I would add the following comments:
  • At the end of the day, little else than controlled, replicated, consistent experimentation can establish causality between two observables. This challenges not only the businesses that do not a have a “test & learn” culture, but also those who attempt to measure what they do, but rely mainly on non-causal ex-post estimations. Rigorous experimentation can tell you when you are wrong, and if you are right, it is a good hygiene factor.
  • The approach of the article is very pragmatic when stating that experimentation mainly serves to test tactical changes / decisions. Based on Mars’ experience with marketing science and “laws of growth,” I would argue that replicable, rigorously established patterns can definitely serve as the foundation for the marketing strategy of a company. While the tactical improvements are the main short term outcome of a good experimentation culture and practice, it can be a critical enabler for scientifically grounded and effective strategic shifts.
  • Last but not least, the idea that "With a small investment in training, readily available software, and the right encouragement, an organization can build a “test and learn” capability” can have far reaching consequences on an organization like Mars. Mars has historically been a decentralized, locally driven, entrepreneurial company. This has arguably been a critical enabler for Mars’ success so far, especially in period of fast economic growth and distribution expansion. Now that growth is expected to be close to flat in mature markets, that population aging and nutrition concerns are effecting a slow decline in the per capita calorie consumption, we are more than ever in need of the creative power of entrepreneurship to sustain our growth. In the increasingly complex, multi-channel, heterogeneous, information-overloaded business ecosystem, it will probably have to be a very well informed entrepreneurship. The opportunity for decentralized learning that is offered by a small scale rigorous experimentation capability is a critical enabler for today’s and tomorrow’s entrepreneurship, probably as important as the freedom of action granted by decentralized decision making. 
And I would recommend this great book about the topic, which is a very easy read and takes us through the disruption from rigorous experimentation to business, manufacturing, sociology, government, education, health, etc :-)
-- Yassine El Ouarzazi

Solving yesterday's solutions: A history of management theory

The idea that management practices can be studied, with lessons learned and distilled into theories, has been with us for decades. Short vignettes such as A Message For Garcia by Elbert Hubbard (1899) and The Go Getter by Peter B. Kyne (1921) have extolled employee virtues, and Alfred P. Sloan's "Organizational Study" memo to GM (1920) is considered a foundational work of corporate management theory.

Of course the business environment changes over time, with corresponding shifts in the theories of what management practices work best -- often based on the (reported) recipes used by the success stories of the day. It would be useful to chart these theories and their changes over time in order to ask: Are there consistencies across eras? Can we observe, and perhaps predict, cycles of in best practices? Do certain practices have a "shelf life," beyond which we can expect them to become obsolete?

We enjoyed Nicholas Lemann's recent piece in the New Yorker,When G.M. Was Google” precisely because he takes this long view and

addresses these questions. Among the changes Lemann notes is the decline in the social vision of the corporation, as well as the shift from viewing “bureaucracy” as a solution to attacking it as a problem.  Indeed, on the later point he notes:

What managers consider a problem is typically what their predecessor considered a solution.”

He also finds enduring similarities in the recipes for success over time, notably an attention to consumer/user needs, and corporate cultures that don’t just foster innovation inside the company—they attract the brightest and most innovative minds from outside and draw them in.

Image source: The New Yorker

--Clara Shen

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