Innovation Isn’t Mysterious

I was so excited – I could not believe that one of my professional students had agreed to show me around his workplace. You see, he was part of a skunkworks operation for a well-known technology company. I was giddy with anticipation.  What would I see? This was going to be so cool!  I’d long been fascinated with, but intimidated by, the topic of innovation. It seemed so mysterious and confusing.  How, exactly, does it work? 

Imagine my disappointment when he greeted me in the lobby of a very boring suburban office building, took me through minimal (and very typical) sign-in at security (I was expecting a full body scan and intense interrogation), and then escorted me to his workspace – a beige cubicle in the middle of a cubicle farm.  What?! I was expecting brilliant colors, yoga balls, trampolines, solid walls of whiteboards covered in cool ideas, excited voices and maybe even some rock music. 

I looked around the silent office, everyone heads down in their own cubicles. I studied every piece of paper pinned to his cubicle wall, every book on his desk.  I even asked him to show me something he was working on and he pulled up a technical drawing.  He obviously thought I was being ridiculous to have been so excited to come and see such dull, normal-looking work.  I finally admitted that I expected something so much more exciting where ideas are being thrown about, energy is vibrant, and somehow a break-through idea is born!  I expressed my disappointment. And he explained that this is not how innovation typically works in real life.  

I’ve since studied much on this topic and innovation really boils down to some simple concepts that I wish I’d known all along. It’s “easy” to innovate if you know what it means. 

There two main categories of innovation:

Incremental Innovation – My student was working on incremental innovation, which simply means to take something that exists and make it better. We see it every day via incremental improvements in products or services.  The introduction of a new version of software to align to every-changing user needs would be an example of incremental innovation (sometimes this type of innovation is also called “sustaining innovation”).  In the government sector, an example of incremental innovation is automating services such as driver’s license renewals or Social Security applications using the Web – to use new technology to deliver mandated services more efficiently and effectively.

Disruptive Innovation – This is what I had associated the mysteries of a skunkworks operation. The truth is, all innovations are incremental: one idea combined with another idea to create something better. The term disruptive innovation applies when the resultant idea ends up disrupting the way things are done in an industry or changes consumer behavior. 

A well-known example of disruptive innovation is Uber. Uber used incremental innovation to solve a problem. Taxis are not always available when one needs a ride – especially in smaller or dispersed metro areas. People and organizations in those areas do have cars for hire (the first Uber drivers were actually taxi drivers), so that left one strategic problem to solve: how to connect the rider with the driver — how to “hail a ride” remotely. Smart phones, it turned out, were the key. Uber was born by creating an app that connects drivers with people who need rides.  Initially, it was simply incremental innovation – combining existing things in new ways. Why is Uber’s innovation now considered disruptive? Because Uber has disrupted the taxi industry by changing consumer behavior. 

Incremental innovation is a much more “manageable” process, and many large corporations, such as the skunkworks I toured, excel at it. And sometimes this process results in disruptive innovation which can become messy, unpredictable, and may even create conflicts within an organization as the breakthrough disrupts entrenched interests and ways of doing things.  This is when things get exciting.  But sadly, not in the way I had envisioned. Innovation is not so  mysterious after all.

KPIs Are Essential (But Know Your Audience)

I wanted to sink into the conference room floor. I was so embarrassed and was convinced that I must have just asked the stupidest question in the world. To this day, I cringe at the memory of standing there, in front of the entire leadership team at a prestigious, world-renowned, non-profit organization, while the entire team stared blankly at me. I was well into the second decade of my consulting career and was accustomed to taking on major projects. This time, I’d been asked to design a dashboard of metrics for this organization.  I’d gathered the heads of all functions and departments to explain the purpose of the project, their roles as stakeholders, and then, poised to write responses on the whiteboard, I asked the question: “Can each of you tell me what three to six key metrics you use (or would like to us) to manage your part of the organization?” My thinking was that this would give us a quick and rough outline of what metrics mattered most to the people who ran the organization – these same people who were now staring at me. Finally, one gentleman spoke up and said, “I believe this is what we hired you to do – don’t you know what metrics we should use?”  

Fast forward another decade and I have a lot more KPI experience under my belt and I’ve worked with dozens of major organizations on performance management as well as implemented KPIs for my own use in managing an organization. And in hindsight, I now realize that the managers who were staring at me should have known their key processes and value drivers and been able to articulate what they were trying to accomplish and how to measure it.

I have since learned that there are two kinds of managers/leaders. Those who operate at a tactical level and those who see the full picture. The tactical managers keep very busy managing what Covey calls the whirlwind of daily operations. Some focus only on the day-to-day actions that are required of them.  Some are great at people skills. Some are more entrepreneurial and implement innovations, initiatives, and projects they feel are needed as they sense and respond to risks and signals at the tactical level. But after all these years, I see how these sorts of managers consistently fail to achieve meaningful long-term results. They perform well on daily operations, but few can achieve sustainable improvements in those operations.  And that is exactly what happened to every one of the managers in that conference room. They did their daily jobs well, but they couldn’t produce long-term results for the organization.  Within five years, all were replaced.

The other type of managers/leaders see the full picture of key processes and value drivers and they leverage KPIs to monitor and manage performance. They know KPIs (metrics) will enable them to better manage overall performance as well as to assess the impact of any innovations, initiatives, and projects. 
  
I’ve since learned that I didn’t ask a stupid question. I simply was asking it of the wrong sort of manager/leaders. I’ve asked that same question of the other type of managers and they rattle off metrics faster than I can write them down.  

I have learned to assess the audience first and be sensitive to the fact that not everyone knows about KPIs or how they enable managers with insights and power for improving performance. Some individuals may need some basic education about the topic, they may have a long change management journey to buy into the value and use of KPIs, and they most likely will need coaching help to figure out their key processes and value drivers, as well as how to determine appropriate KPIs to use.  

It’s not rocket science. To some of us, it is simply common sense. But not everyone is wired this way.  We are all born with different natural tendencies so I’ve tried to learn to keep that in mind. And I no longer sink into the floor when someone stares blankly at me. I simply start asking more questions until we find common ground and then work forward from there.  

Change Management Matters

The producer, her face pale, rushed up to me when the cameras stopped rolling and said, “You shouldn’t say that!”  I was being interviewed for a segment on Bloomberg and was wracking my brain to remember what kind of word bomb I may have dropped.  The offending phrase? I had said, “You must consider change management.”   She had interpreted it to mean that I was recommending a change of management team. I had to explain the definition of change management. And it reminded me that no one is born knowing this stuff.  Sometimes we have to learn the hard way.

At the young age of 24, I led an implementation of ERP software at a location of a Fortune 50. The technology, systems, and processes for the entire manufacturing facility – from contracts to purchasing to production to shipping and invoicing – were completed and the system was up and running on-time and on-budget.  The President of the facility presented me with the company’s coveted Annual Outstanding Achievement Award for my efforts. I have chosen to say “for my efforts” because I can’t honestly say that I achieved results.  

I couldn’t articulate the problem at the time as I knew nothing of change management. Now I know that the implementation problem I sensed is called “resistance to change.”  I had never before considered the people side of the equation when deploying new systems and processes.  As an engineer born with a systems-thinking mindset, it didn’t naturally occur to me that a human would refuse to cooperate with improved methods, rules and systems. In spite of repeated trainings we provided and my daily offers to assist the users, I saw the old-timers finding workarounds to the new software system.  I would see them throw away reports without glancing at them, ignore their new computers which were gathering a deep layer of dust, and go back to their old manual methods of running the production facility. They would come in every morning with their clipboards and pencils, shouting and jockeying for the attention of the foreman to get their products made ahead of others in queue. They ran the plant at full capacity at all times.  

The problem was, because I knew how to use the software system, I now had an overview of the big picture. I knew the demand, the open contracts, and what the customers expected and when. I could see the ever-increasing inventory levels of finished product.  And I could see the shipping schedules that showed these products weren’t due to ship for years. The plant was overproducing at an alarming rate.  They were completing six years’ worth contracted parts and components in under six months. And I could see that few new orders were coming in nor did we have the ability to directly influence more orders/sales as this plant was a supplier to parent entities that were producing the final product (aircraft and weapons systems – products with very long sales cycles). At this rate, our plant risked running out of work. I tried to show the key managers the data but was shooed away as a nuisance who didn’t understand “how we do things around here”.   

Twenty-four months later, as I had predicted, the parent company closed the plant. I had heeded the writing on the wall and made my exit long before the plant was shuttered. The saddest part is that a small town lost one of its biggest employers. And I still believe that had I understood the principles of change management and user acceptance had been achieved, the managers may have made different decisions and all those people (almost 1,000) would still have their jobs. That’s a lesson I never forgot. 

Read Part 1 of The Four Things I Wish I’d Known here.  Read Part 3 here. 

I was asked to speak to a group of new college graduates and to share a few things that I wish I’d known earlier in my business career.  What would have helped me to avoid major mistakes or to do a better job earlier on?  This is part of a series of 4 blogs in which I share the four things I wish I’d known.

Strategic Knowledge is a Must Have

Paul Porter was his name. He was my first manager and was conducting the first performance review of my career. I was less than six months out of college and working for the company that is now Accenture. I’d been working insane hours, using a software that no one else in the entire company knew how to use yet, and delivering on an innovative solution to a transportation company – a very early use of mobile technology and portable laptops when the only connectivity for the user was a landline in a rural motel room and the “laptop” was almost too big to fit in the overhead bin of a plane. I was the envy of my peer group due to the innovative nature of the engagement.  

I fully expected a glowing review. My heart sank when Paul turned the page to the “needs improvement” section of the evaluation and I saw he had written a full paragraph.  He advised that I needed to look up and see the big picture instead of focusing on the tasks at hand.  It had never occurred to me that it is not only ok, but encouraged, that a worker look up and understand the big picture. Isn’t that what the higher-ups are supposed to do? Wouldn’t I be overstepping my bounds? Besides, I was mystified as to how to even begin to do this.  

I wish I had known the principles of strategic planning and management and had the sense to ask to see the company’s strategy. I wish I had asked to see the overall project charter and to understand the business case, as well as the stakeholders, of the engagement. But I didn’t even have the basic knowledge (or vocabulary) to ask these questions at the time.  

Now, I give similar advice to anyone who asks how to improve their employees’ contributions. Ask them to consider the big picture. But you must also take the time to explain strategic principles while showing someone the big picture – whether it is how the company works, the key processes, the value drivers, the overall strategy, or a project charter. For many, this may be their first exposure to these fundamental business concepts. Help them to understand how they fit in and how they can contribute. And solicit their ideas for how to improve things.  

Some people thrive at the operations level.  But to Paul Porter’s point, you aren’t maximizing your contributions if you only focus on the assigned tasks at hand. We have an employee who has what, to me, would be the most mundane task-oriented job in the world.  But he loves his work and he is brilliant at it. When I showed him our strategy, I was delighted to see he was the first to volunteer some insightful feedback and ideas. He continues to contribute to the big picture in a meaningful way due to his tremendous depth of knowledge in his specific operational function.

The irony of that first review is that I’ve spent the better part of the past two decades doing nothing but strategic management. Once I started noticing the big picture, I was insatiable. For me personally, strategy and overall operational design is incredibly interesting and rewarding. I wonder where Paul Porter is today? I’d like to thank him.  

Read Part 2 here.

I recently had a conversation with an organization’s board member who said, “I’m so frustrated.  We have a balanced scorecard but I don’t see how the things the management team is measuring or executing are linked to our strategy.  I don’t see the connections.  Our balanced scorecard feels operational.”  He was correct.  Even with my practiced eye, I, too struggled to see clear linkages to strategy.  Then I fielded a confidential call from the management team at the same organization who expressed their own frustration that their board members “just didn’t get it.” And as these conversations cycled, the board members became even more exasperated that there was no evidence that the organization was actually executing its strategy.

So, what’s the diagnosis?  In two words:  Broken Linkages.

While there are multiple approaches to developing a balanced scorecard, most balanced scorecard practitioners will agree that balanced scorecards connect strategic planning with strategy execution.

But too often, the critical linkages between strategy and execution are broken.

Why?  A primary cause for broken linkages is when one team creates the organization’s

strategic plan (a Board or an executive team) and then a different team (a management team or task force) is expected to “convert” the strategic plan to a balanced scorecard.  This piecemeal, “throw it over the fence,” approach to scorecard-building has three fatal flaw

1. The strategy itself is usually incompatible for use with a balanced scorecard.  Typical strategic planning frameworks rarely contain clear and purposeful linkages all the way from high level vision, mission, and competitive positioning down through focus areas (strategic themes) and strategic objectives (which are the critical linkages used by balanced scorecard to connect strategy with execution).
2. The strategy is usually incomplete.  More likely than not, there was no consideration during strategy formulation of the four interdependent dimensions of strategic drivers and results (e.g. balanced scorecard perspectives) which usually results in a focus on results with no consideration of key drivers.  Key drivers are critical strategic choices and the crux of ensuring an executable strategy.
3. The strategy gets lost in translation.  The balanced scorecard team and/or their consultant find themselves sifting through a strategy document to try and extrapolate what the driver and result objectives should be, what perspectives they belong in, and if/how the objectives are interrelated.  These are the basic building blocks for a balanced scorecard.  This approach can lead to erroneous assumptions about strategy, or even worse, the team may just abandon the effort to interpret the strategy and, instead, fall back on obvious operational objectives needed to ensure that the organization functions exactly as it always has.  The resultant operational objectives may or may not be aligned with the organization’s desired FUTURE – its desired strategic direction or its shift in competitive positioning.

In other words, they end up with a scorecard similar to the one the board member was complaining about…one that simply measures normal operational execution and has no connection to strategy.

If your linkages are broken, contact us about a strategic health assessment.  Your current strategic planning & management materials and process will be assessed and compared to best practice and a gap assessment will be delivered to show you where the linkages are broken and what needs to be done to repair them.