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.

Assessing Conflicting Design Requirements (Car Example)

This Southbeach Model shows one of the key principles from TRIZ, namely that everything is both useful and harmful, and its just a matter of perspective as to whether something is considered to be predomantly useful or harmful.

Consider the Car, useful, as it provides Travel; however, it consumes fuel and creates pollution, which counteracts the Environment. People still drive cars despite this, hence the car is considered predominantly useful despite its harmful side effects. Furthermore, "The need for speed", or the need to accelerate to higher speeds more quickly, results in many cars also having turbo chargers. These typically are designed to improve performance and this is often at the cost of creating even more pollution.

Southbeach can be used to understand root causes and perform impact analysis. Also, it is useful for functional decomposition of systems. Consider the following extension to the above diagram:

Here we have extrapolated that pollution contributes to Global Warming, which in turn is actually destroying the Environment, and in a much stronger way than pollution alone. The model recognises that there are also other factors contributing to Global Warming, and that these may be worth exploring. What you explore depends on who you are and what you are trying to do. An environmentalist may explore this avenue. A car manufacturer may explore the pollution avenue in more detail. There are examples of car manufacturers who have taken that extra step and recognised that the car could potentially clean the environment - having an overall positive effect. There are actually cars that clean the air now.

This model additionally shows how further design considerations result in systems becoming more complex over time. Here the need to improve cost effectiveness and reduce pollution has resulted in this car being upgraded to include an economy mode (or "green" mode). This reduces the fuel consumption. However, for comfort this car has also been upgraded to include air conditioning to improve comfort, a desirable feature of the car. This counteracts the economy, hence increasing the fuel consumption and increasing the pollution.

The system is now considerably more complex, and as a consequence contains many more tensions as parts of the system are working in opposition to each other. This results in another iteration of the design process, where further parts are added to compensate for the conflicting effects of the existing parts. The result will be an even more complex system, but by design, this will reduce waste by resolving some of these technical contradictions between the components. There are other ways to improve systems, and some designers are exploring how instead of adding more and more parts (increasing the weight, incidentally, and thereby increasing fuel consumption further), they are looking for ways of improving component design and simplifying the overall design to increase the harmony of the system. This involves taking a holistic approach to the design goals. We will talk more about this in future.


A further elaboration of this model might observe that Car's only produce polution when they are travelling - and it is actually the act of consuming fuel that is the primary cause of that pollution. This model below shows the pollution being created by the act of fuel consumption, and breaks that pollution down into different types using the 'is-a' construct. This elaborated model also includes blue boxes indicating the actions that could be considered to improve the situation.

Holistic Problem Solving

This Southbeach model illustrates the benefits of pro-active, holistic problem solving over the more reactive approach of working blind and responding to issues by just treating symptoms. Southbeach models naturally support the ideas of root cause analysis and impact analysis through their cause and effect notation, useful things being shown in green and harmful things being shown in red.

In this example, the harmful causal chains in the centre start with "working blind" which leads to missing the big picture and creating more work for others, as well as treating symptoms and creating more work for one's self. Both of these behaviours naturally result in making things worse.

These harmful behaviours are in opposition to the surrounding useful behaviours:

On the left we have understanding whos involved to understand others' views and create shared awareness to produce support for change; resulting in making things better. This aspect of problem solving involves stepping back from the problem and understanding the context and effects of a problem to enable more effective, complete, and widely acceptable solutions.

On the right, we have understanding the root cause to deal with the real issues, remove the actual problem, and create lasting change; resulting in making things better. This aspect of the problem solving involves stepping into the problem and understanding the source and reasons the problem came about to enable more effective, sustainable, solutions that avoid problems coming back again in different forms later on.

These two behaviours are in opposition to each other, as are their consequences - making things worse often results from short term thinking and superficial attempts at improvement. Making things better may take more effort and require more commitment, however, results in a more sustainable solution with longer term benefits.

Not that the above Southbeach model shows the useful behaviours around the outside counteracting the harmful behaviours in the middle. Over time, a shift in behaviour to the outside can dissolve the harmful behaviour and improve performance and achievement.

If this approach is not adopted however, and an organisation, society, culture, or other group continues to contain elements that behave in this harmful way, the good work done by those who are investing the extra effort to address the real issues will be undermined by those that are merely taking superficial action without considering the bigger picture.

This results in opposing behaviours that create a continuing spiral of issues, as shown below. The difference with this model is that the useful bahaviours on the outside are not actually counteracting the harmful behaviours in the centre. They are shown here merely as in opposition - i.e. this system is not improving because the harmful behaviours represent a force for negative change that is holding improvement at bay.