Tag: innovation

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.

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.

Innovation + Reinvention = ReThinking

innovation, reinvention, rethinkingLet’s face it, the biggest problem that we have in the exciting world of creativeinnovationreinventiveness is the English language. Yes, I made that horrible big word up but I might as well use it because everyone else has their own definition of creativity, innovation, invention, etc.

You hire a consultant or adviser to give you some of the aforementioned and what do you get? I’m sure it is not when you thought you would get! So what is the point of this article?

Well, many think that you should be in one camp or another. Well, I believe there is a camp that we can all belong to. The idea that I believe that we can all buy into is what I call ReThinking.

The sceptical will be thinking that I am inventing another term to try and make money out of. Bear with me and I will explain.

Have you seen the innovation curve that for any technology give the number of innovators (2.5%), early adopters (13.5%), early majority (34%), late majority (34%) and laggards (16%). It would seem that a very small percentage of us are actually innovators.

There is another term that has been used by others, reinvention. Here people take a look at what they are currently doing and rework or reinvent either their products or their company. Some might call this incremental innovation.

ReThinking incorporates both Innovation and Reinvention. This seems sensible to me as all of the skills and behaviours that need to be used are common. What is very different is the degree to which they are used and possibly the radical nature of the purpose to which they are put.

What is important here is the type of thinking that is used. If an external event occurs (say a stock market crash or a supplier shortage of bananas) how do we react appropriately? To fully understand, think of the Chameleon. It detects its surroundings and then blends in with the environment. It reacts appropriately.

What the Chameleon does not do is cycle through all of the psychedelic colour combinations it can until it settles upon the right one!

But your business is not a Chameleon, right? But it can be! First of all, you need to think of your business as being organic and not having a hard and fast structure. Whether you go to town on this is up to you, just don’t put up barriers where there do not need to be any.

Although employees might work in a particular department, such as production or finance they can all contribute to change processes that must exist.

A small but powerful example of this are the lorry drivers that transport goods around the country. They don’t just drive lorries though, do they? A driver often waits outside a factory or depot. They are sources of intelligence (or if you are mischievous, sources of misinformation!). How full are the lorries, where do they come from, which haulage companies are being used?

Knowledge can be acquired from the environment by anyone and ideas can be generated by anyone. The next question is how do you gather them, how do you evaluate and then act on them? This is the essence of ReThinking, constantly thinking about what you do and whether you need to tweak things or react in a more drastic fashion.

As the recent outbreak of coronavirus has shown us, waiting until and infection is on our doorstep is far too late to take action in many cases. For businesses, it might just be a case of reacting to a future that is not here yet!

How Innovative And Flexible Is Your Business?

how innovatve and flexible is your business

To be innovative we must be flexible and embrace change. Innovation is a special type of change program. It has many other attributes that make it deeply fascinating and sometimes difficult or impossible to grasp, but change is what it is.

Sometimes this change is fast and sometimes slow, but change is a competence and managing change can be learned, developed and practised.

The thing that trips us up most often is that we get no practice, we have to improvise. Most of us would not stand up at a comedy club and improvise a 10 minute set. But our bosses expect us to do this and we gladly assume the role.

Of course, we can never practice the stages of change without actually changing. But in our businesses, we crave stability. We either change once in a lifetime or we keep doing so in a way that we don’t have time to bed in the changes that have been made.

Worse still, we invent an innovation program that changes rapidly. This results in bewildered staff, unhappy sponsors and management shaking their heads at the hastily drawn up Key Performance Indicators.

Even in changing business environments businesses make the assumption that volatility will be low.

For obvious reasons, the least volatile part of a business is related to finance. For example, consider the process of budgeting. The budget is usually set once a year and tinkered with occasionally. Often budgets are reused. It might not be efficient to use zero-based budgeting (budgeting from scratch) but how often are the inputs to a budget reexamined?

But what happens when there is volatility in the marketplace? Commodity prices can rise and fall quickly. Recently we have seen fuel prices affect the costs of all goods that need to be transported. Crop failures can push up food prices and regulatory changes can force huge burdens upon us all.

What would you do regarding your finances if the cost of fuel rose by 50% due to events in the Middle East? What would you need to do and how fast could you do it? Would it spell the end anyway?

Some businesses do conduct some scenario planning or create a series of ‘What if?’ statements so that they have some idea what to do. This is a little like leaving instructions for a simple board game. What happens when the board game is different from the one mentioned in the instructions?

To be truly agile (nimble, flexible, innovative or whatever adjective you favour), a business must create a system that reacts automatically to its surroundings rather as a chameleon does in nature. You might find it useful to take a look at the following two posts No More Change Programs – Meet The Super Chameleon and Innovation Constipation – Are You Suffering?

How do we create this elusive flexible or innovative business? Well if you are starting a new business you can start as you mean to go on. Although whoever is providing startup funding might take in interest in why you are doing something that does not obviously have a ROI (Return On Investment).

If you are a larger business then they are ways of making the necessary structural and cultural changes. The businesses that have been doing this for years make it look easy. It is not! However, once you have mastered this (a bit like riding a bicycle) then things get easier.

If you want to know more or would like some case study material then please get in touch.

So your homework for today is to answer the following:

How does your company cultivate change and reinvention capacity in its people and managerial processes? What currently works? What can be improved or replaced?