Category: Blog

What Is The Cost Of Innovation?

cost of innovationThere is no manual that says exactly how to estimate innovation costs but here is a common sense approach that seems to work well.

Imagine that you are a company that needs to introduce 5 new products into the market place. First of all you need to spend some time generating ideas. Without knowing your actual method of idea generation and until you have had time to calibrate your own process then this is a bit of ‘wetted finger in the air’ calculation.

We know that the ration of truly wacky ideas to those that might be worth looking at is one order of magnitude i.e. 10 to 1. Similarly, the ratio of ‘might be worth looking at’ to ‘definitely worth a look’ is once again an order of magnitude.

So if we want to have just one idea that is worth pursuing then we should expect to generate at least 100 crazy ideas, thus our small company wishing to create 5 new products will need at least 500 crazy ideas.

So far so good, but how do we generate the ideas? You could collect them in a suggestion box but the quality would be variable and it may take a while although the cost would be low.

An idea generation session with a group of people could generate your ideas in less than a day. This would be more expensive and would only use a ‘snapshot’ of the expertise and knowledge available to you.

By now you should get the idea that we can roughly work out how many ideas are required, and how long this would take, and the resources that would be used.

Not all ideas make it to products so some extra redundancy needs to be built in, and then there are overheads such as management and the costs of prototyping and manufacture, but these should be aspects with which you are already familiar.

So there you are, a simple way of working out your Innovation costs. But hang on a minute, life is not quite that simple. Below is a list of other things that you might wish to consider:

  • HR requirements (culture, motivation, working practices)
  • Idea capture systems (how do you record ideas and avoid forgetting them)
  • Knowledge transfer (what worked, what did not, avoiding reinventing the wheel)
  • Feedback for improving all aspects of your process (including estimating costs!)

This is a simple guide but good enough to allow you to get some sort of handle on the cost of Innovation if you have never done anything quite like this before. Reality can be a little more complex.

There are often reports published of how much some larger companies spend on Research and Development (R & D). This is not strictly the same as Innovation but allows us to get a handle on it. The figures vary a little but figures of around 1% of turnover are not uncommon.

So a company turning over say $100 million would expect to budget around $1 million then?

Maybe but not necessarily. I once helped a company with such a turnover and the budget per annum was probably closer to 0.1% of turnover.

How come, you might wonder? Well for a start I used some tools to measure the capacity of the business to innovate which meant that when we identified areas for improvement we did not have to spend money across the whole of the company. Investment in training and development activities was targeted.

Because we rotated staff through the Innovation ‘centre of excellence’ we had the opportunity to work with all staff eventually and the postings were seen as beneficial, something everyone looked forward to. Not only that but it was an ideal way to spread know how gained back into the business as a whole.

This is a complicated topic but you can find further reading on Innovation Not Spots and Innovation Measurement by clicking on the links. Please get in touch if you would like to know more.

Are You Curious?

How curious are you?

In his book The Human Edge, Greg Orme gives a simple but extremely powerful example of curiosity.

We are related to a single woman who lived in East Africa around two hundred thousand years ago. About seventy thousand years ago, a descendent of this woman gazed across the Red Sea and thought ‘I wonder what is on the other side?’ These early pioneers were so curious that they decided to find out. The rest is, as they say, history.

Since that time curiosity has been part of human nature and it has supposedly even managed to kill a cat or two!

In rich countries, the life expectancy of young people could soon be 100+ years. How can we work in the same industry, have the same interests for a working life of perhaps 60 years?

We should follow the example of a famously poor student, Albert Einstein. He himself stated that he had no special talents apart from being insanely curious.

We all learn better when we are interested in a subject but it seems that curiosity helps you to learn even when you do not find a subject either interesting or important. A final point in favour of curiosity is that without it creativity is impossible.

Let us be clear, curiosity is not the same as lifelong learning. Lifelong learning is a painfully long process that can only be assessed accurately in the final moments before your death. Imagine that just before you die, someone says ‘well then what have you learned whilst you have been alive?’. Curiosity is a condition that you carry around, an itch that you need to scratch. It makes you wonder about something so that you have to do something about it right now. So, at the end of a day you have learned something (or not). No need to wait until you die.

Learning by being curious is the main reason for the success of many well known names such as Walt Disney, Jeff Bezos, Elon Musk, and Oprah Winfrey. In many cases reading books was the key.

Can we learn from possibly the most curious person in history – Leonardo Da Vinci? His curiosity was recorded in his many notebooks. There are sketches, drawings, and lists that reveal how he thought. He knew when to wander and daydream and when to focus on one particular thing, to master it and try to make it become real.

In order to properly develop our curiosity, we need to roam widely, to get a basic knowledge of a few areas. Have you ever noticed that once you have a rudimentary knowledge of a topic, you want to find out more or perhaps even master it completely?

One of the best tips that I have come across is ‘Ask Google’.

Don’t just ask Google when you need to know the opening times of your nearest burger bar or cinema. If you daydream, Google it. Google questions as well as answers. If you turn up surprising things then Google those as well.

Curiosity is apparently contagious. Unfortunately, incuriosity is also contagious. Curiosity levels will rise and fall depending on your surroundings and the people whose company you keep. This is why Leonardo made lists of people that he wished to interview (or more likely interrogate). Many others have done the same.

So, it seems that there could also be a short cut to learning. Create the right environment, surround yourself with the right people and have a list of questions that you wish to have answered. Basically, you need to get ready to have curious conversations and avoid incurious people!

Make Sure Your Different Is Different

how different is your different

March was BC (before coronavirus) and we are now in the era AD (after disease). The virus is not totally gone but businesses and other organisations are already trying to determine how to move forward. Some will try to carry on as before and will either a) fail or b) evolve slowly. Others will realise that the world will be different and will, therefore, try to be different.

The problem with this way of thinking is that everyone else is trying to be different too. You must ensure that your ‘Different’ is not the same as everyone else’s ‘Different’. How?

First of all, let me introduce you to precept number two of my twelve precepts of Creativity. It simply states ‘Explore the givens’. When we are trying to work out what to do, we usually do not go back to basics every time. There are some things that we just assume will be constant.

For example, we might have priced up a project last year and decided it was too expensive because of the IT costs. This year, even though costs might have fallen we have not revisited a potentially beneficial project because we have made assumptions about IT costs.

This is a trivial example but we can encounter hundreds of these in a week in our workplace.  We might do things in a certain way because the Health and Safety manual says so. In fact, the manual might say what has to be done rather than how!

There are other ‘rules’ such as how a document should look or what format a proposal should be in. There are ‘givens’ everywhere and sometimes challenging these might give us the edge we are looking for.

I also teach people a couple of techniques that relate to the boundaries of problem issues. We ask the questions ‘what if’ regarding the boundaries and this allows us to unpick the problem and make it look different (and solvable).

So far, I have made it sound like we just do not conform. Well yes and no. Let us consider an actual example.

I am currently revising my book Creativity In Action and targeting at larger companies not small businesses. It goes without saying that some of the content will be different but that is not what sells books. Books are sold on looks. A book has to grab your attention when you walk up to the Business Books section of your local book store.

If you search for information on what makes a good book cover you will find a lot! The results will include the following:

  • Must include title, author, subtitle
  • Convey the tone of the book
  • Include a hint of the plot or sub plot
  • Include a photo or graphics
  • Choose the right font (how?)
  • Choose the right colour (how?)

And the list goes on. There appears to be a whole heap of collective wisdom about the best way to create a book cover.

My question is do we need it all? The main criterion is the book must say to people ‘you are curious, pick me up’. The book will then sell itself (or not).

On the flip side, everyone who is writing a book that will compete with mine could be using the same criteria. Apart from the unlikely event of coming up with the same title, they could choose a similar, font, colour or just layout.

So, which of the criteria are mandatory? Well in the case of a Business book this is probably not necessary. If someone picks it up, they can look at the foreword or introduction.

How about the author or title? Well, the title might be a good idea but the author is not really necessary either. Other decorations such as graphics or pictures are the type of thing that publishers might try and compete with. We don’t really care, the book just has to stand out.

I don’t know what the cover really will look like but I have included some standout book covers below (not business books though) alongside  a mock up of (a possibility for mine). As you can see, I have settled on a bold colour with a small title. Will this stick out? Let’s wait and see.

Whatever happens, I would like you, the reader, to try determine whether the rules that you follow without question, the ‘givens’, really do have to be obeyed or would breaking the rules provide an advantage for you?

Organic Innovation, The Best Way Forward

organic innovation

Organic Innovation is NOT about innovation within agricultural industries although they are not excluded. I am suggesting that Organic Innovation closely follows principles that are derived from agroecology.

At the very centre of this is Diversity. Diversity is important in all aspects of Systems Thinking. In agriculture we mix crops together, employ rotational grazing etc to improve the environment, making it more productive and prevent resources from being exhausted.

Diversified agricultural businesses are more resilient to economic shocks, ensuring survival.

Businesses employing Organic Innovation in the manner that I describe here are employing diverse people with wide-ranging areas of expertise and ways of working. Not only will the workforce be able to withstand economic shocks but if properly managed it will provide new and exciting solutions, giving it competitive advantage.

Co-creation is a bit of a buzzword right now but we will collaborate on a deep and very grand scale. We will be working not just across companies but across the world. There will be globalisation but in a very different way and Design Thinking will be at the heart of everything.

No longer will we consume what large companies make for us, we will demand that large companies make the things that we want and deliver the services that we need. We will also help in creating these.

Synergy will also be key. Anything we do will have to have multiple benefits, not just generate cash for shareholders. Companies will need to have multiple strings to their bow, not just do one thing.

Efficiency is also key although lean Thinking will take a back seat. If organisations are to be able to change within a somewhat ambiguous world then there must be a small amount of excess capacity or else, they will be reliant on external change agents and not be masters of their own destiny.

Just as an ecological business will try to eliminate waste, Organic Innovation will try to ensure that ideas, knowledge, and skills are used efficiently. Where unexpected benefits, products or services are generated then these will be explored, possibly spinning off other organic businesses.

Resilience will be critical in the future so the emphasis will be on using local resources (buildings, talent) and not ‘forcing’ production by importing from elsewhere. Just as farmers collaborate with the sharing of equipment, swapping goods, and attending markets, so businesses will come together. This can happen either through the use of technology such as the internet or by co-locating complementary businesses together (going one step further than the somewhat tired science park concept).

The workforce of the future will depend heavily on human and social values since we are talking about the value that is created as a result of social interactions. The alignment of values will be key both within the workforce and with our customers. There must also be a reflection of what is happening within society as a whole.

Consider a company in the current climate (COVID-19) which soldiers on relentlessly with little concern for the wellbeing of staff or customers. Many companies right now are considering others, but only because they have no choice to do so. Businesses that respond positively are thriving.

Within Organic Innovation, surprisingly we find that tradition has a part to play. Most innovative businesses are relatively new but there does need to be a hint of the past whether it is company history or local culture. This tends to help with a sense of belonging but with room to grow an organisational culture. Start with nothing and you have a very sterile (i.e. both stark and infertile) environment.

Governance will also have a large part to play. Stakeholders will be ethically aware and employees might be keen to have a stake in the business that they work within. It may also be the case that a number of individuals with in-demand skills might have portfolio careers (what we might consider to be zero-hours contracts) and so relationships with these key workers must be maintained.

The parallels between Innovation and Agroecology are strong. Diversity, co-creation, synergy, efficiency, re-purposing, resilience, values, culture, and governance all have key parts to play if we want to be both useful and have staying power in the future.

 

Thought Leadership – A Way Forward?

thought leadership

The fast pace in the current digital age means that businesses and business models are changing more rapidly than ever. Combine that with the current coronavirus pandemic and the need for rapid change and swift decision making and you have a recipe for ‘excitement’. Thought Leadership is most definitely required.

New technologies and innovations will quickly sweep away well established and seemingly solid business models within just a few months. There are plenty of examples, Blockbusters, and Kodak to name just two.

In the latter case, Kodak failed to adapt to the growth of digital photography and the decline of photographic film, and a company that had traded for more than 100 years was forced to file for bankruptcy.

Blockbuster, which had itself been a disruptive company that saw the growth in home video and DVD during the 1980s, failed to see the decline of video and DVD and the potential for streaming.  It failed to adapt to change and fell by the wayside while players like Netflix dominate the same space today. In a cruel twist of fate, Blockbuster passed on the chance to buy Netflix in its early days.

To further underline the pace of disruption,  just 12% of the Forbes 500 from 1955 still existed in 2015.

So how can businesses remain relevant to their customers in these circumstances? The answer is to do what Blockbuster and others failed to do and adopt innovation in order to survive.

The impetus and thought leadership behind this needs to come from the top.  Senior staff must lead from the front, and encourage their teams to think progressively and kick start innovative thinking within the business.

This isn’t thought leadership as it’s often portrayed: featuring in guest blogs and conferences, but rather actually inspiring people within a business with innovative ideas and practical steps to turn these ideas into reality.

Thought leadership is a powerful way to inspire people both inside and outside of your company. Telling a credible story around a shift in your industry using real-life disruptive examples or builds authority and a consistent view across your organisation – driving innovative thinking and alignment.

The challenge for executives, CEOs, Marketing Directors, Directors of Strategy, etc is to remain up to date with trends in fast-moving industries when they already huge demands on their time, tight budgets, and competing priorities.

This has to be overcome for businesses and their executive teams though, as the ability to remain on top of events and how innovation and technological changes have the potential to affect their markets and clients is increasingly important.

The next stage is how executives can embrace thought leadership within their organisations and find and disseminate key information to help them stay on top of events.

1. Set a goal. Educate others.

Like any initiative, the first question to ask yourself is “why.” Why do you want to be a thought leader? Is it to get promoted, change careers, raise funds or boost brand awareness for the company?

2. Position yourself.

Personal positioning is very similar to corporate positioning. How do you want to describe yourself so that people know what you do? Ask yourself what you’d want to be known for and how you can support that image. This is actually branding as opposed to simply just advertising your position within the organisation.

3. Demonstrate credibility. 

Similar to the corporate or product messaging process, ask yourself the tough questions. What makes you an expert and why should others care? Once you’ve identified your area of expertise and the value that you bring, the next step is to prove your expertise to build credibility.

Use examples and stories to support your claims and highlight your aims.

4. Build a story to humanise your brand. 

Having a personal story will give your company a face and a human touch. People often love personal stories, which allow them to relate to your journey, challenges, and successes versus just hearing about a product and its features or functions. The stories you tell could be about you but they are more likely to relate to other businesses in your market niche. like the Blockbuster and Netflix examples above.

5. Be a resource.

Now that you know how you want to be perceived and have a narrative, think about how you are going to leverage tools to share tips, tricks, and best practices. Perhaps there is new research in your industry. Leverage that and use your know-how to add insight to the report. Always provide insights not just reports. Remember you are a thought leader not a follower.