Best Practices: Innovation
Innovation: What's in a word? The definition varies from person to person, but there are a few sure-fire ways to make sure a project ends with celebration rather than frustration.
- By Fred Bayles
- December 01, 2006
When the brain trust at SourceCode Technology Holdings Inc. gathers to
discuss possible new products based on .NET and other Microsoft platforms,
the word "innovation" is rarely heard.
"We don't sit there and repeat overused clichés like 'adaptive'
and 'innovative,'" says Jeff Shuey, the global alliance director
for the Redmond, Wash., workflow developer and Gold Certified Partner.
"We're more likely to say, 'Wouldn't it be cool if we could do this
or that with a product?'"
Dipping into a simpler, more direct argot seems to be working. SourceCode
has seen tremendous growth over the past decade by taking Microsoft foundation
systems from Visual Studio to Office and building out a range of customized
products for various industries. That approach helped the company earn
the distinction of being named this year's Microsoft Information Worker
Solutions Technology Innovation Partner of the Year.
Yet as Shuey excitedly discusses past success and future plans, he hardly
ever uses the word that has become the Holy Grail among business technology
executives. Instead of attributing his company's success to innovation,
he likens the strategy to a good jazz combo riffing on an idea.
"It's more like us improvising off a Microsoft melody," he says.
Facing Innovation Frustration
"Innovation" has arguably become the biggest buzzword of recent
years among businesses large and small. A Boston Consulting Group (BCG)
survey of 1,000 corporate executives earlier this year found that 72 percent
ranked innovation among their top three strategic priorities. And, by
the same percentage, executives said they planned to boost innovation-related
spending this year; 41 percent estimated that the increase would be 10
percent or more.
But while the majority of those surveyed said they value innovation,
nearly half were unhappy with the results of their initiatives. Some 44
percent expressed dissatisfaction with the return on their investment
on innovation projects; just 52 percent viewed their own innovative capabilities
as superior to those of their competitors.
James Andrew, a BCG senior vice president who oversees the firm's worldwide
innovation process, says the results point to a paradox in the field.
"A vast majority of companies are spending more and more money on
innovation every year, but they aren't satisfied with the result -- or worse,
they don't know if they're satisfied," Andrew says. "Many companies
don't like what they see in financial returns. But there are other companies
that can't even get their arms around what their financial returns should
This last point came through loud and clear in the BCG survey. Many executives
who wholeheartedly support the concept of innovation admitted that they
aren't really clear on how to measure its progress. Nearly two-thirds
of respondents said they use the less-than-specific metrics of time-to-market,
new-product sales or return on investment to track how their innovation
initiatives are working.
And many companies don't evaluate the success of their innovation initiatives
at all -- which Andrew calls a mistake: "Not measuring is like driving
without your headlights in the dark; you can't see where you're going
or even if you're still on the right road."
Andrew and other innovation gurus say the dissatisfaction and confusion
over innovation efforts point to a chief obstacle when it comes to developing
a plan: Everybody has a different definition of innovation -- and a different
answer to the question "What does innovation mean for our organization?"
Just as in the parable of several blind men "seeing" an elephant
in different ways based on which part of the animal they each touch, managers
gathered around a conference table may have entirely different ideas about
their organization's innovation priorities. For one, it might be research
and development of new products. For another, it might be overhauling
service delivery or production techniques. For a third, it might be undertaking
an ambitious upgrade of IT systems to enable other kinds of innovation.
And they might each be right. But the fear of being wrong, or of focusing
on the wrong priority, can often stifle creative notions.
Defining the Elephant
In fact, Andrew sees this lack of clarity as a key problem. "Innovation
has become perhaps the most overused business word in the English language,"
he says. "If you can't define it, you won't know what it is if you
even have it." His own definition of the term: A process that uses
new knowledge to generate a payback.
Simple? Maybe. It depends how you define "payback."
Of course, the desired result could be just an increase in revenues.
But Andrew cites other potential benefits, noting that innovation can:
- Strengthen your company's internal operations.
- Generate new information about your business that leads to other
- Enhance your brand.
- Revitalize your company's public image and reputation.
For many companies, the biggest challenge is figuring out exactly what
kind of innovation is needed to achieve their ultimate goals.
Howard Diamond, the president and CEO of ePartners Inc., a Gold Certified
Partner with headquarters in Seattle and Dallas, says that too often people
and their companies get bogged down in the search for an ideal outcome
rather than viewing innovation as an organic process of mistakes and corrections.
"They waste time trying to find the right innovation," he says.
"That's a mistake. When you innovate in the wrong ways it's self-correcting.
You get that feedback quickly from the market and from your people. The
search for perfect innovation is much less important than to simply be
innovating -- all the time."
Diamond points to an example of a program at another company he once
headed. The grain of the idea was to tap into the entire staff's creativity
with a "Stop Doing Stupid Things" campaign. Under the initial
plan, employees would be encouraged to identify and suggest solutions
for problems and inefficiencies in the company's day-to-day operations.
But the campaign's bluntness was challenged by the company's human resources
"The HR people said we couldn't do it because the employees would
be insulted," Diamond recalls. "They said it implied that people
were doing stupid things."
So Diamond had an innovative thought of his own. He renamed the campaign
"Stop Howard from Doing Stupid Things."
The result was a rousing success. Freed from the fear of coming up with
a wrong idea or with something that might seem too critical, employees
stuffed the virtual suggestion box with various proposals—most of
which had little to do with their CEO. Diamond says the program went on
to save the company $20 million over two years. Various employees were
rewarded with bonuses Diamond said totaled "a couple of million"
Creating a Creative Culture
Diamond sees a moral in his story for all executives: Innovation comes
from the top.
"Getting a group of senior staff commanding them to be innovative
now doesn't work," he says. "It's up to the people who run companies
to create environments where people believe that change and innovation
can actually breed change and innovation."
At SourceCode, exactly that type of open environment nurtures creativity
and innovation, Shuey says. Innovative projects rarely come out of formal
meetings with PowerPoint presentation charts and graphs. Instead, they
can literally start around the water cooler.
"The first phase of many of our ideas comes as conversation in hallways
and elevators, often with customers or at partner sites and other seemingly
random places to host an innovation discussion," Shuey says.
He also notes that about half of his team's innovative ideas involve
tinkering with current products. The other half evolve out of requests
from SourceCode's customers and partners.
In both cases, the next steps serve as variations of the "Field
of Dreams" model: If we build it, will they actually use it?
"We'll often build it without really knowing if it is going to fly,"
Shuey says. "It usually does, but only after trying a couple different
Encouraging Contrary Thinking
Andrew suggests identifying specific areas for innovation, such as products,
customer service or your company's own internal operations. Sometimes
innovative solutions are readily apparent. Other times, contrary thinking
is just the ticket.
Diamond offers an example of an idea that came from a midlevel manager
in his former company's customer-service section. At first blush, the
manager's suggestion seemed counterintuitive. Rather than relying on the
usual practice of assigning low-paid entry-level employees to handle incoming
customer calls, the manager suggested increasing those jobs' perceived
importance by raising salaries by 25 percent. The twin goals: increasing
customer satisfaction and decreasing the traditionally high turnover for
"It sounded silly at first glance," Diamond says. "But
when you thought about it, you realized the usual way of doing business,
having the lowest entry-level position in the company having the most
contact with customers, was silly, too."
The plan was implemented with great success. Customer service slimmed
down from a department of 300 people offering varying service-quality
levels to a team of about 100 highly efficient workers. "Because
the people were better, they could answer questions faster and handle
more calls," Diamond says. "We ended up with fewer people in
the department and a dramatic increase in productivity."
Tips: from Idea to Reality
Innovation has been the subject of scores of books,
magazine articles and studies. For those who prefer
the short form, here are seven factors to keep in mind:
- Foster innovation from the top. Your own
attitude toward change has a direct bearing on how
your employees view innovation. Lead by example, not
by lip service.
- Encourage everyone to participate. Don't
limit discussions to top executives—your employees
could have better ideas to improve company processes.
Offer bonuses based on the success of an idea to encourage
both input and more careful thinking.
- Be clear about what you want. Uncertainty
can make some people timid about offering suggestions.
Make it clear what you're looking for—while maintaining
an open mind about outside-the-box thinking.
- Remember that perfect is the enemy of good.
In most cases, there isn't one true way. Your quest
for improvement can involve many good ideas.
- Give it time. A true innovation may need
some tinkering as you implement it. Missteps are fine
as long as you have mechanisms to catch them and adjust
your course as needed.
- Follow through. Don't underestimate the
importance of the less-exciting but equally important
process of actually implementing those great ideas.
- Measure your results. Companies often aren't
sure how to measure the return on their investment
in innovation. Financial payback is certainly one
metric. But keep other gauges—such as employee
and customer satisfaction—in mind as well.
During that same period, the company's customer count increased and company
revenues doubled. Although Diamond acknowledges that it's hard to attribute
all those gains to the innovative approach to customer service, he says
those changes unquestionably contributed to the company's success.
Measuring the Results
As companies offer up more and more dollars at the altar of innovation,
it becomes increasingly essential to understand whether all that spending
is actually reaping any benefits—a task obviously easier said than
"Everybody is looking for the silver bullet—that number that will
tell them everything they need to know about innovation," says Boston
Consulting Group's Andrew. "It doesn't exist."
Instead, Andrew describes addressing issues in three categories of metrics
to close in on how well a particular innovation effort is working:
- Output. What is this initiative generating for the company?
Is it cash, or is it something less tangible, such as improved customer
goodwill or improved employee morale?
- Input. What is this initiative costing you? This question
includes hard cash, but there are other considerations as well. For
instance, are you dedicating your best people to this project? How many
hours are being devoted to the effort? What's the cost of shifting those
resources away from other parts of your business?
- Performance. How well is the process going? Is it working
the way you wanted or expected it to?
As one example, Andrew cites the case of one of his customers, a large
financial service institution that was frustrated about an innovative
product offered to its customers. Those who used the product loved it,
but the overall response wasn't as strong as executives had hoped. A closer
look revealed that the company simply hadn't done enough up front to make
sure the product reached all of its customers, Andrew says. "The
innovation was wonderful, but it had only gotten into a small part of
the company's account base."
The anecdote points to a final problem with many innovative initiatives:
lack of follow-through. Andrew says many companies expend too much effort
coming up with innovative ideas and too little actually executing them.
"Most companies have more issues with the realization and commercialization
of an idea than the generation of that idea," Andrew says. "They
have to remember that all three phases are equally important."
Fred Bayles, a Boston-based freelance journalist, writes regularly about customer service and other business issues. He is a former national reporter for The Associated Press and USA Today.