Tag: risk

Innovation Constipation – Are You Suffering?

innovation constipationInnovation Constipation? It sounds painful, is it?

The answer to this question really does depend on your definition of pain. We are not dealing with a medical condition here, just using it as a metaphor.

The employees of a business will not experience pain although stress and discomfort might feature if they have to forgo pay rises or worse, experience redundancy.

The most important thing is to think of what a lack of innovation might do to your business. Will it stop it growing (or growing as intended)? Will it lose out to competition and shrink? Will you lose out to competitors when tendering for opportunities?

A business can embrace innovation to varying degrees. See my previous post about creating a super chameleon.

At the very least, Innovation could lead you to:

  • New products, services or processes
  • Greater advantage over competitors (knowledge cannot be easily copied)
  • First mover advantage (you will be looking externally)
  • Leveraging your most precious assets (employees)

There are many more things that Innovation could do for you but this is sufficient for now.

So, without doing an in-depth diagnosis of your Constipation (the Innovation variety of course), can you see if you have a problem?

The answer is yes, and it is surprisingly easy. Innovation depends on a supply of existing knowledge and new shiny ideas. Somehow, they must meet and be investigated, prototyped or captured for future use if not useable right now.

It is possible to do a full-blown analysis of Innovation potential, knowledge usage and creativity climate for really serious businesses but a simple analysis can be done by simply answering the following questions with a ‘yes’ or ‘no’ answer.

  • Do you have an effective way of capturing and evaluating ideas (a suggestion box ranks as a ‘no’ I’m afraid)?
  • Does every employee have an opportunity to contribute ideas (be honest here, asking ‘have you got any ideas’? at a weekly meeting or performance review counts as a ‘no’)?
  • When evaluating ideas do you ensure that all employees can provide an opinion/evidence (senior managers gating ideas is a ‘no’ here)?
  • When initially evaluating an idea do you ignore cost?
  • When initially evaluating an idea do you ignore risk?
  • Do you have a method of assessing the value of the knowledge of employees?

Really you should be able to answer ‘yes’ to all of these questions. One ‘no’ might not be serious but the more you have, the more problems you are likely to have.

Reading through the list of questions, it might seem that I have a thing about letting everyone have a say or perhaps a downer on senior management. This is not so. These indicators are themselves indicative of many other things that might not be going quite right within your business.

If you are alarmed by the state of your Innovation Constipation or want to measure the potential of your business or organisation to innovate then please get in touch.

The Cost of Ideas

polaroidWhat is the cost of ideas? What normally happens when people come up with bright ideas at work? A manager will typically calculate the cost of implementing it. This cost will then be balanced against the value potential of the idea. This is normally additional income from increased sales or reduced operational costs. The more creative an idea is, the harder it can be to determine the value in monetary terms. Many potentially very exciting ideas are not implemented simply because a manager has decided that to do so would be too costly.

Many managers are excellent at working out the cost of implementing an idea. They often fail to calculate the cost of NOT implementing an idea. This can often be far more than the cost of implementing. The cost of ideas is thus a two sided coin.

How much does it cost not to implement an idea? Here is a simple example where an idea might lead to cost savings on a production line. The cost of the idea in terms of equipment and labour is USD500,000 and is a one-off cost. As a result of this, the cost of manufacturing each widget that comes off your production line is reduced by USD5.00. Your Sales department tells you that you are currently making 100,000 widgets each year. Sales are expected to rise 10% per year over the 5 year life of the equipment.

Simple maths tells us that the cost of not implementing the idea is zero in year 1 and then USD500,000 in year 2. Over 5 years the cost would be over USD2,300,000 which is significantly larger than the initial investment needed.

Things are not always this easy though. Imagine that one of your R&D staff has come up with a pen-sized device that can see through solid objects. There are potential applications in medicine, construction and intelligence gathering to name a few. To get such a device into production might cost say USD50,000,000 but how can you predict the sales potential of such new technology? How can you also keep it secret from your competitors until launch? The potential seems huge but you cannot put your finger on it.

We know that ideas do not spring from single sources. It is likely that a competitor will come up with a similar idea at some point. What will they do? Will they develop the idea and create a new product? What will happen, will it be a success? If it is then you lose out big time in terms of cash. But what about your reputation?

The cost of not implementing an idea might be both financial and long-lasting damage to your reputation and brand.

Does anyone remember Polaroid? Polaroid was the word that described instant images. The company failed to keep pace with digital technology and almost went bankrupt.

Next time an idea is put to you, think very carefully about the cost of not implementing it as well as the actual cost of implementing it.

Using Negativity Wisely

Is negativity really bad?

There is a lot of it about, negativity. Negativity is often seen as disruptive and something to be banned from organisations. Often we can spend far too much energy fighting it so why don’t we make use of it? In a previous article I described the use of Reverse (or Negative) Brainstorming as one of the ways we could do this. This was purely for generating ideas for new products and services but you could use it in many other ways too. Here is just one possibility.

Do you have any ideas about the things that could wreck your business? Market changing new products announced by competitors, new government legislation, flash flooding or severe bouts of food poisoning are all possibilities! Some of these threats are predictable (to some extent) such as flooding but many are not. It is likely that you have the predictable events covered already so let us focus on the unpredictable for now. As well as protecting your business you could actually discover ways to threaten the competition.

As you would expect, we are going to use creative thinking techniques but in a slightly more focused way than normal. Instead of asking “What could destroy our business tomorrow?” questions should be more relevant to the type of business that you have. To start off with try coming up with some ideas about the areas in which your business might be vulnerable. If you manufacture products from raw materials then you might be vulnerable in areas such as production or delivery of raw materials, continuity of energy supply, or distribution of finished products. You might also be threatened by Government legislation or exchange rates if you export.

How can we use it?

Now let us get focused. If we have identified that transport and distribution is a potential issue then ask:

  • What could stop us obtaining raw material or delivering to customers?
  • If the price of diesel fuel rose dramatically, what would happen?
  • In the event of our competitors doing a deal with road haulage companies, what would the effect be on us?

If you were making consumer products you could also be worried about bad PR if your products were faulty or even killed people! You get the idea?

To get the best ideas you will need to involve as diverse group of people as possible and make the questions relevant to your business or business.

If you do identify serious threats then you can do something to reduce their impact or avoid them altogether. Identifying a ground breaking product that might put you out of business is also good since it provides you with the opportunity to develop such a product and hence outfox your competitors.

Wherever there is a threat there is also opportunity, so get thinking!

Audacious Ideas

audacious ideasWith most ideas, there is a correlation between how audacious or risky an idea is and its potential for economic reward. Disruptive or radical innovation produce  ideas which disrupt industry and dramatically change a business sector. These are audacious and highly risky but if they work out as hoped, audacious ideas can bring huge rewards.

Niklas Zennström and Janus Friis developed their own voice over Internet protocol (VoIP) and then built a business around it – Skype. They offered free telephone calls over the World Wide Web as well as cheap calls via the Web to ordinary telephones. Their business model was audacious. A couple of unknown Swedish guys took on the world’s telephone service providers. Their idea was both innovative and seriously risky. Potential users might well have decided they did not trust  VoIP or Internet Service Providers who  might have tried to block Skype calls. In which case, the two Swedish guys would have lost a lot of money.

Skype has been a huge success story. There are more than 100 million Skype users around the world and the two founders sold their company to eBay for USD2.4 billion. Not bad for an audacious idea.

To visualise the importance of audaciousness in business innovation, imagine a simple graph with X and Y axis. The right end of the X axis is marked “Audacity”, the left end is marked “Boringness”. The top of the Y axis is labelled “Risk/Rewards”. The bottom is labelled “Stability”. Next, draw a narrow diagonal bar from the bottom left corner of the graph to the upper right corner. This bar represents the range where most business ideas fall. Audacious business ideas are risky yet innovative. Boring business ideas are safe and not very risky. But they do not bring high rewards. Most business ideas, of course, tend to fall near the axis.

There are several useful things we can learn from this exercise.

  1. In Europe and America we tend to favour highly innovative ideas, but it seems that a handful of boring business ideas resulting in incremental innovation can also bring benefits. You should not focus all your innovative efforts on big, disruptive innovation. A number of smaller, moderately innovative ideas should be mixed in.
  2. Many companies have an overly strict review process that requires every single dea pass a number of hurdles before it is implemented. All too often committees reduce the risk of the idea. They seek to protect the company against risk or most likely they seek to protect their own jobs by not sanctioning risk projects. By reducing risk, they are also making an idea more boring, less innovative and reducing the potential reward.
  3. Conversely, an idea can often be pushed to be more audacious, thus increasing its reward potential – but also its risk. Bear this in mind the next time you brainstorm ideas. When you get a few good ideas, don’t stop there. Push the best ideas further.
  4. If an idea is very boring and of low risk, its reward potential is also low. Thus you need to be certain that the cost of implementing the idea will not be greater than the rewards it brings in.

So, the next time you have a business idea, go on and be audacious. Push the idea to the limits and don’t be afraid to go with it.

Psst – wanna avoid being creative?

There are many lists of how to do this and that,  but what if you want to avoid doing something? What if you wanted to avoid being creative? If this is you, then follow these tips and you are well down the path to being as intellectually dull as ditch water!

  1. Follow the same  routine every day, for everything.
  2. You will not see this because you have read item number one and think you know it all!
  3. Assume that your way of thinking is always right and your ideas are the best.
  4. Only pretend to listen to other people’s ideas, they know nothing.
  5. Play it safe, avoid taking chances. Never have a different sauce on your burger.
  6. Copy everyone else.
  7. Plan everything to the last detail BEFORE you start doing it.
  8. Pretend not to care and not to be inspired.
  9. Never take time to chill out and rest your brain.
  10. Believe that alternative modes of thinking are for actors and artists.

Finally, if you recognise any of the above traits in your work colleagues then please get in touch. There is a chance that they can be saved.