The Enemy of Innovation – Eliminating Variation
I recently had the opportunity to interview Jeff DeGraff in advance of his appearance at Pipeline 2012 on May 10, 2012.
Jeff DeGraff is Professor of Management and Organizations at the Ross School of Business at the University of Michigan. He is co-author of several books including Creativity at Work, Leading Innovation and Competing Values Leadership. His PBS program Innovation You introduces his ideas about innovation to viewers across America. Jeff’s opinions on contemporary business matters are covered by NPR, Business Week, US News and World Report, Forbes and the Wall Street Journal to name a few. He writes a syndicated blog for Psychology Today and the Huffington Post. He has consulted with hundreds of the world’s most prominent firms and has developed a broad array of widely used creativity and innovation methodologies and tools. Dr. DeGraff founded a leading innovation institute, Innovatrium, with labs in Ann Arbor and Atlanta.
Here is the text from the interview with his thoughts about innovation:
1. When it comes to innovation, what is the biggest challenge that you see organizations facing?
Senior leaders, who are typically charged with the efficient operation of the enterprise and rewarded as such, don’t fully understand how specific practices produce or destroy the value of innovation. As a result they often put the wrong people in charge of their innovation initiatives. Variation, or hedging as it’s called in the venture capital community, is essential because it accelerates the failure cycle and quickens the discovery of the valuable solution. Though they come in all types and temperaments, contrary to popular belief, what they share is a tenancy for self authorizing behavior – they march to their own drummer. Innovation requires deviation; deviation requires deviants.
2. Do you feel that companies need an innovation strategy? If so, where does open innovation fit in?
Yes, but it should be routinely reviewed and corrected. Innovation is the only time-based form of value. It goes sour like milk. Hence, stick with your innovation strategy too long and it goes bad.
As someone who worked on collaborative innovation strategies early 1980’s with some of most celebrated firms, I’m astounded to see the claims regarding its current potency. Consider the fact that four billion people jumped onto the web and cell phones at the turn of the Millennium and of course you are going to see an increase in collaboration. Yes, this spirit of collaboration does contribute to a sustainable culture for innovation but patent researchers are quick to point out that the output is mostly incremental. Like efficient markets, the curve bends to the middle. So you get more of less. There is no substitution for deep domain expertise. Follow biotechs, Nobel Laureates and even top chefs and diffusive power of you can follow world class ideas as they come and go.
3. What is the biggest obstacle to generating future growth within an established enterprise?
The more successful an organization becomes the bigger it gets. The bigger it gets the more it focuses on optimizing its resources. The more it optimizes it resources the more it eliminates variation. Innovation requires variation. We have seen the enemy and he is us.
Incumbent organizations are typically the least innovative because they stand to lose the most from changing the predictable dynamics of their markets. Smaller firms have less ability to compete on scope or scale so they naturally resort to high-growth-high-risk strategies which inevitably include breakthrough innovation. This is essentially why small and midcap stocks grow at substantively higher rates than large cap stocks.
4. Which companies do you look to as leaders in innovation?
Obvious examples include Apple and Google but the truth is that most lists of the “most innovative companies” have cumulative annual growth rates comparable with the S&P 500.
In my work, I identify four distinct types of innovation that produces four specific types of value that are rewarded or punished investors depending upon the industry and competitive landscape.
- Create: High-reward-high-risk innovators. Vision driven. Seek to produce breakthrough innovation and new market organic growth.
- Chase the impossible to develop unimaginable competencies
- Challenge standards, convention and dogma – “The crowd is usually wrong”
- From lab to boardroom, question authority
- Control: Low-reward-low-risk innovators. Process driven. Seek to produce efficiency and quality.
- “Scientific” processes: Total quality management, continuous improvement, just in time inventory, 3D printing, lean manufacturing and flexible platform design
- Derive simple rules from all failures and build replicable processes
- End to end technological capability from product design to manufacturability
- Compete: Fast-moving-low-sustainability innovators. Goal driven. Seek to produce profits quickly.
- Move quickly on acquisition opportunities
- Focus the portfolio but allow most businesses to operate as self-directed units with own P&L
- Many businesses and products but only one global brand
- Collaborate: Slow-moving-high-sustainability innovators. Values driven. Seek to produce knowledge and capability.
- WL Gore
- Great ideas emerge over time, as do great innovation teams
- Competencies are developed through coaching and new opportunities
- Make a little, sell a little, review what works and doesn’t, and revise
I love regional companies like Zingerman’s Deli. “Binny’s Brooklyn Reuben” is not to be missed.
5. What should an organization be aware of if they decide to pursue open innovation?
The same detailers not only exist in when boundaries are crossed in a virtual environment but they are typically amplified.
- Global reach vs. local politics
- Rapid experimentation and prototyping vs. chaotic implementation and poor follow up
- Quickly search and reapply best solutions across boundaries vs. slowly adapt innovations not invented here
The grass is always greener…
6. What is the biggest mistake you see companies make when it comes to innovation?
First, firms often focus on processes and neglect people. These processes take on a “one size fits all” quality as if it were the secret formula to Coca-Cola. Every process has limitations, including the one you are using now.
Second, organizations love to run the aforementioned innovation processes through the middle of the enterprise which is designed to eliminate variation. Think about your metrics, hurdle rates and stage-gate systems and it becomes clear that these practices are designed to created stability through standards, policies and similar controls. Innovation moves from the outside of the bell curve, where risk and reward are reversed, and moves to middle over time.
Third, the biggest factor may be launching your innovation initiatives without the needed funding or resources. As they say back in the neighborhood, “Talk is cheap; it takes money to buy whiskey.”
7. What skills do you believe that managers need to acquire to succeed in an innovation-led organization?
Leaders need to ambidextrous and have the range to move through the organization to connect the dots of innovation.
- Develop high quality targets
- Enlist deep and diverse domain expertise
- Take multiple shots on goal
- Learn from experiences and experiments
Most organizations have tremendous innovation capabilities concentrated in businesses or locations but often lack high practiced leaders who can move between them.
8. If you were to change one thing about our educational system to better prepare students to contribute in the innovation workforce of tomorrow, what would it be?
The eminent American educator and philosopher John Dewey had it right over one hundred years ago when he helped reshape the methods and curriculum of our schools. Dewey believed that we learn by doing. You can see Dewey’s influence in the way we train doctors in America – See one, do one, teach one. Implicit in Dewey’s methodology is the pragmatic idea that progress, innovation, is derived from our encounters with real challenges and opportunities. We need to reconnect theory with practice, apprentice our youngsters and encourage them to use their ingenuity to surpass us.
Tell Me More
If you’d like to hear more of what Jeff DeGraff has to say about managing innovation efforts, he will be leading a session at Pipeline 2012, taking place online May 10, 2012 along with several other innovation, research, and open innovation leaders. Jeff will be leading a session currently titled “Connecting the Dots of Innovation” at Pipeline 2012.
Braden Kelley is a popular innovation speaker, embeds innovation across the organization with innovation training, and builds B2B pull marketing strategies that drive increased revenue, visibility and inbound sales leads. He is the creator of the Nine Innovation Roles Group Diagnostic Tool and author of Stoking Your Innovation Bonfire from John Wiley & Sons. He tweets from @innovate.
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