Sunday, 23 November 2008

Building Value with Business led Innovation

In his article Would you kiss this Pig? on his blog, Innovating to Win, James Todhunter describes a situation that is all too common in Industry. This relates directly back to my example from October on Holistic Problem Solving, describing a more evidence-based approach to strategic planning rather than focussing on short-term tactics that end up wasting company resources and people's time by investing in projects that are ultimately doomed to failure, or worse, result in missing the real opportunity that is just around the corner. In holistic problem solving, I presented the risk that if those diverted by such misguided short-termism represent a stronger force than those seeking to understand the bigger picture and obtain alignment to move forward from a sound strategic basis, then a downward spiral will result.

This Southbeach model explores the same problem from another angle; how to apply the process of innovation to building value in organisations. We see from this diagram how the perspective of innovation as "building new stuff" from a technology perspective often leads to failure to deliver the desired impact whilst understanding the business opportunity leads to building new stuff with a pre-destined purpose (as opposed to a theoretical purpose).

Clearly Technology led Innovation is an enabler for Business Innovation, and certainly for tecnology companies it is often directly applicable to building value, creating differentiators, and growing their market share. For non-technology businesses, however, Technology is almost always no more than an enabler, a means to an end, some say a necessary evil. For sure there are plenty of harmful side effects of technology; the cost, the complexity, the dependency, but it is predominantly useful as it allows us to make massive leaps in our capability through automation and combining information in new ways that can lead us to identify and exploit the new business opportunities in our markets. Managing enabling technology effectively is key.

Marketing applied to ill-conceived concepts that result in poor value propositions do not get very far, and to reuse again the colourful metaphor on which James based his article, this is no better than putting lipstick on a pig... no one is going to buy it, and if they do, they may soon regret it, as may you.

Focussing on understanding the business opportunity, or business need, to determine where to invest in enabling technology results in "the right new stuff"; stuff that has an application, and if communicated effectively by marketing, will sell, and grow your market share, and create success for your organisation and its customers.

The same concept of perspectives is used in this Southbeach model as in the one on Holistic Problem solving; there are two behaviours in the world, and they often coexist in the same organisation - these behaviours are in oppostion to each other. Those that look for ways of spending their budget on innovation or new things are putting the cart before the horse, jumping the gun, doing things the wrong way around, and they will create an increasing cost base that has no corresponding ROI; they will effectively be counteracting the work done by those that are spending the time understanding the business need to determine where to invest their budget in creating new value. Laying these two behaviours side by side like this demonstrates how they are working against each other throughout their evolution.

Companies often combine techniques of pay for performance to influence the individuals towards behaviour that is better for the business (rather than the individual), however, the annual reward cycles for individuals, and reporting cycles for companies encourages short-termism. A more effective way to create behaviour that builds long term value is to build culture; see my previous post on Drucker's Spirit of an Organisation.

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