Innovation and Marketing

The gift of complaints

2009-12-02T23:24:00.004-06:00

Oddly, it isn’t always a good idea to discourage or disallow negative thinking.

In 1952, Dr. Norman Vincent Peale published a very successful book titled, The Power of Positive Thinking. It sold over 5 million copies and has been published in at least 15 languages, and despite being dismissed by a good number of psychologists, the ideas in the book have endured to this day. Central to his philosophy of positive thinking is the idea that any challenge or obstacle should be faced with a positive outlook – that negative thinking and complaints should be avoided. This idea has become a pervasive view of how successful people, companies and institutions should approach challenges.

And yet, despite the incredible success of some people who are optimistic and sunny in their outlook, when innovation is required the need for negative thinking and complaints is overwhelming. As the psychiatrist R. C. Murphy wrote in The Nation in 1955, “Think Right: Reverend Peale’s Panacea”, positive thinking “..is not only inadequate for our needs but even undertakes to drown out the fragile inner voice which is the spur to inner growth.”

If no one complains, there is no reason for change and ultimately innovation stops. Negative thinking is ultimately…a positive force for change.

Fundamentally and paradoxically, complaints are an expression of hope and optimism. In order to complain about something today, one must imagine that it could be better in the future. Without hope of a better option, complaints are not only a waste of time and energy, they are by definition…impossible. When a customer complains, they are implicitly telling a company that they believe it can be better.

A lack of complaints, therefore, should not be seen as a sign that things can not be improved. Rather, it suggests that customers are resigned to the way things are. It can also indicate a hopelessness and ultimately a lack of loyalty. Customers who do not complain have given up on you, even if, for the moment, they keep purchasing a product or using your services. If someone isn’t complaining, there is a good chance that they are no longer truly committed to your company, your product, your mission…they no longer believe in a better future.

Most people, including myself, would rather avoid hearing complaints and understand that complaining can be unpleasant for others. That is why most official communications avoid the negative. The attempt to put a “positive spin” on problems is not only a smart tactic for keeping everyone calm and happy, it is a fundamentally polite thing to do. We avoid complaining because we want to be nice – even if it means witholding the greatest gift we can give: a belief that someone or something can be better.

Listening to complaints can be so unpleasant that it is very difficult to perceive them as gifts. Most companies, instead of asking customers to complain, will conduct elaborate “satisfaction surveys”. Instead of asking, “How can we do a better job?” they ask, “How satisfied are you with us right now?” No matter how a customer answers a satisfaction question, it is very difficult for them to help a company do better in the future.

As an example, if a customer says that they are “somewhat satisfied” with a product or service, (the typical responsed to a multiple choice satisfaction survey), what can a company do with that information? Is there any way for a customer to tell a company, even if they decide to write in some comments, how to better satisfy them? Satisfaction is such a passive and vague concept that it is difficult to imagine any reasonable quantitative measure for more or less satisfaction.

Interestingly, people become more vague the happier they are with something. Ask someone to describe what they love about their sweatheart and they will likely speak in generalities such as, “she is so sweet,” or “he’s the best.”

But if you ask the same person what is wrong with their true love, they start to get very specific, and they start describing exactly how that person could be better. “I love him, but he’s such a sloppy guy. If he would just spend a little time grooming himself, he would be georgeous.”
Baked into that complaint, no matter how annoying it may be to the recipient, is a belief in potential…as well as a blueprint for innovation. The man who listens to that complaint – and to the complainer – will likely learn how to become the more elegant, handsome man he has the potential to become. Ignoring or not listening to that complaint is an implicit decision not to innovate.

Instead of asking a customer how satisfied they are, a company can gain actionable intelligence if they allow their customers to complain. As an example, Apple Computers has some of the most devoted customers in the electronics industry. There are, perhaps, hundreds if not thousands of web sites, blogs, publications and associations devoted to analyzing, criticizing, and prosthletizing for Apple’s products and services, including MacWorld, Apple Insider, Mac Rumors, Cult of Mac, Mac Mojo and countless others. Devoted customers are constantly complaining about their Apple products in these sites…and constantly giving the development teams at Apple Computers their faith, and instructions about how they might improve.

Of course, too much negative thinking and complaining can be just as dangerous as too much positive. There is a difficult balance between the need to nurture something and the need to find out what can be improved. But the next time someone complains, perhaps it would make sense to overcome any discomfort and encourage them to complain even more and to figure out precisely how to become as good as that customer believes you can be.

Are you ready to accept the gift of complaints?

The Desire Lines of Innovation

2009-11-25T10:22:00.001-06:00

Once a solution to a problem has been found, the biggest challenge is to get others to accept it. Often there's quite a bit of selling and convincing that has to be done, but why force it? Is it possible to innovate without selling change?

Consider the notion of “Desire Lines”. Originally described by Gaston Bachelard in his 1958 book, The Poetics of Space, a desire line is a path left by people’s use of space. A particularly graphic example is the erosion created in the ground as people and animals walk over vegetation towards their destination. Most parks and college campuses have desire lines etched in the grass lawns – areas where people took short cuts off the carefully designed, planned and constructed concrete footpaths. Frustrated landscapers have long tried to keep people from destroying the grass and flowers by creating fences and other obstacles – but they rarely work, as people tend to simply walk around those obstacles, creating new desire lines.

Most of the roads in older communities were built on top of desire lines created by horses, people and carts as they made their way from destination to destination. Never a perfect geometric grid, these roads responded directly to the actual needs and behaviors of those who used them. Instead of fighting desire lines – it is possible to put them to use. Many designers will intentionally delay the building of walkways for several months and instead just plant grass around and between buildings. After a few months, the natural traffic of students will create desire lines in the grass that can be “read” as a plan for final concrete walkways. A wider path is built in the deeper areas of erosion and a smaller path in the light areas because the desire lines illustrate where more or less people walk.

By building on the desire line – it is possible to outsource the design to the hundreds of people who use the paths every day and unconsciously improvise their own course.

Desire lines can be found everywhere – not just on the ground. Whenever people move through their lives, interact with others, buy things, change things and improvise things, they leave a path. Everyone doesn’t always follow precisely the same path, but the desire lines can be read and understood.

A company that sells products to customers can often find desire lines right in their own balance sheet. A clear customer desire line was found when accounting discovered that one of their most profitable and steadily growing areas of business, despite falling new bike sales, was their after-market parts business. In other words, customers were changing their Harley Davidson motorcycles themselves, using parts provided by the company.

Up until the 1970’s, Harley Davidson focused primarily on supplying transportation to military and police organizations. The motorcycle gangs and tough guys that were modifying surplus bikes to their own needs were seen as an annoyance, and perhaps even a threat to their core business. Much as an eroded path through a field could threaten the beauty of a college campus.

Harley Davidson followed the desire line. They started to sell more customization, club membership and the romance of an old-fashioned, rebellious, and incredibly loud experience that had been developed by their customers. Motorcycle sales moved upwards, along with branded clothing, accessories, tattoos, and of course, after-market parts.

Harley-Davidson built their new business model on the desire lines laid down by their customers. Despite some difficulties in recent years, this remains one of the more innovative re-inventions of a company in great part because, instead of trying to stop the desire lines, they followed them and strengthened them.

Finding desire lines should not be confused with typical customer research or focus group work. Whenever a customer is asked, “what do you want?” the answer is always a version of “what I have, but cheaper, easier, or more.” As valuable as customer research is, it should never be relied upon solely to help companies and leaders chart an innovative path – largely because it reflects what exists today versus what could exist tomorrow.

One way to find a desire line in research is to ask customers or voters to fix something that bothers them. Here’s an idea for a new product – how would you make it work better? Here’s a new idea, how would you make it more attractive to others?

But even more powerful than asking questions is to watch behavior. The Internet in particular has become a very good tool for finding desire lines – by aggregating data on what people look at, how they interact with it, how they change it, how they talk about it and ultimately, how they make it their own.

The desire lines are even easier to find and harness on the Internet. Google, Wikipedia, Netflix, and now Twitter are all examples of on-line businesses that have figured out ways to harness the power of desire lines. As Eric von Hippel, author of “Democratizing Innovation” (NYT Monday October 26, 2009) put it, “Twitter’s smart enough, or lucky enough, to say, ‘Gee, let’s not try to compete with our users in designing this stuff, let’s outsource design to them.’” The same thing can be said of many newer on-line businesses. In an environment of transparency, where the behaviors of millions of people can be tracked and translated into data, the strange attractors become easier and easier to understand.

Whoever can follow desire lines is more likely to find successful innovation.

What are you willing to give up?

2009-10-28T22:26:00.001-05:00

Innovation doesn’t come for nothing.

Innovation requires that something is given up in return. There’s always some kind of trade-off; resources, a process, a job, a machine or even an identity has to be abandoned in order to make room for innovation. The old way of doing things has to be left behind, or at the very least, re-contextualized.

If someone were to innovate the English language too much – perhaps in order to make writing and reading more efficient, to create more consistent spellings and grammatical rules, or to improve certainty of comprehension – they might create a better or more effective communication tool, but many will likely have to do without the benefits of understanding writings that are the bedrock of a shared culture and language such as Shakespeare, Dickens, or Wharton. Any innovation has to be compelling enough to give up the benefits of the old, and any innovation that dismisses the importance of an existing system, no matter how flawed, is unlikely to succeed.

But that doesn’t mean that people are unwilling to trade for innovation. When a new approach is compelling enough or when the old approach is too cumbersome or difficult, people will even give up things they are passionately in love with. When compact discs and then MP3 files replaced vinyl records – those records and everything that was built up around it, such as record players, cover art and vinyl record cleaners was abandoned by millions of music lovers. It was difficult to believe that vinyl records could be abandoned in just a few years, as everyone had to buy new disc players, re-build their libraries, and build new furniture to house their collections. And yet, CD’s became the dominant form of music distribution in as little as ten years. MP3 players, once introduced to the masses by Apple’s iPod and iTunes, took less than a decade to sell over 100 Million players, and 2.5 billion songs. (“Apple: 100 million iPods sold, and counting” by Peter Cohen, Playlist Magazine 4.27.07) Effectively, most people gave up their vinyl records even though they loved them.

Three or four generations of music lovers had grown up with vinyl, how could they give it up so fast? It turns out that despite our love for vinyl, there were shortcomings. The music degraded too easily, dust and scratches made distracting sounds; the records took up too much room on the shelves and dancing in a room with a record player tended to jump the needle off the turntable. Everyone was willing to live with those problems until someone better made those minor irritations seem unreasonable. Now, the only vinyl records that remain are essentially a nostalgic collectors’ item, and record companies are fast losing revenues as fewer and fewer people are even buying CD’s.

In the 1880’s, most homes were lit by gas lights. Thomas Edison had invented the electric light, but most reasonable people thought it was an impractical idea. In order to light people’s homes with electricity, an entirely new infrastructure of power generation and distribution would have to be built. As long as the gas light didn’t set your house on fire or poison the occupants, it just wasn’t worth the trouble and the investment to change. Gas companies didn’t want to lose the lighting market, (though they eventually got into the business of generating electricity in addition to providing for heating and cooking).

But over the next quarter century, electric lighting was adopted. Despite objections that electric light was less attractive than gas lights, the danger, cost and dimness of gas lighting became difficult enough that everyone abandoned gas lights and embraced electricity.

It seems likely that we will give up gasoline powered automobiles in the near future. Once a majority of drivers embrace a new form of locomotion, such as electric cars, those gasoline powered engines, along with all the companies, products and practices that surround the use and maintenance of those engines will have to be abandoned and or changed. That is one of the main reasons it has been so difficult for electric cars to be successful commercially – not because the technology is especially difficult, electric cars have been around at least as long as their gasoline cousins, but because companies and individuals who service and use the cars will have to give up a lot.

And yet, according to William Clay Ford, current Executive Chairman of Ford Motor Company, “Customers don’t want to give anything up. So our job as manufacturers is to deliver these new technologies in a way that doesn’t require any trade-offs.” (Ford Looks to the Future, by Bill Vlasic, NYT, 10.20.9)

Drivers will likely have to give up the satisfaction of a powerful rumbling engine as well as the particular look and feel of a gas-powered card we have grown accustomed to. Cars have to become smaller. “Refueling” an electric car takes a bit more time and perhaps some advanced planning. Driving ranges are different. Oil companies, refineries, and gasoline retailers will have to come up with different markets for their products or different products to manufacture and sell. Manufacturers of engines and support services will have to find new customers and new applications as well – and it is very likely that those new markets will not be as large as the ones they have today. There’s quite a bit to give up.

But it is a mistake to believe that no one will give up anything. Mr. Ford, though long a vocal supporter of alternative energy and sustainable manufacturing, has been limited by the conventional wisdom of automobile manufacturers in the US. If you take as a given that customers won’t give up anything, then you have accepted that innovation is impossible. Even if electric cars can deliver precisely the same performance that a gasoline powered car, they will not come without some kind of trade-off. The moment drivers are irritated enough with the price, the inconvenience and the implications of the internal combustion engine, they will be willing to give up the particular thrills of gasoline – no matter how much they may love it now. The instant drivers are seduced by alternative thrills, they will also likely drop their old love as quickly as an old scratched record.

A new buyer of a Tesla electric roadster, a sports car enthusiast and no stranger to the excitement of high octane driving recently confessed to me the thrills of never visiting a gas station, of silent exits and entrances and of unbelievable acceleration that only an electric motor can deliver. The pleasures of gasoline powered cars may begin to appear quaint in comparison, and giving up the advantages may not be as difficult as Mr. Ford imagines.

Just as electric lighting required us to abandon gas lights in the 19^th century, electric transportation will require us to abandon gasoline cars and much of what is associated with it. Just like the gas lighting industry, those engines, the technology, fueling and the support of those engines will be re-focused on task specific applications such as construction vehicles or on-site generation of electricity.

When innovating, make sure you understand the trade-off as well as the benefit, and don’t be afraid to give up the old in return for something better.

If no one buys it - did it happen?

2009-10-19T21:06:00.002-05:00

It is a common mistake to believe that innovation happens when someone comes up with a new idea. New ideas are a common occurrence – every day, people all over the world come up with great new ideas, new solutions and brilliant potential innovations that could possibly end poverty, build a successful company, or make peeling an orange much easier.

Experiments, though crucial to discovering what is possible and how something might be innovated, aren’t innovation. Prototypes and inventions aren’t innovation either, though they are an important step towards proving how innovation could happen.

Innovation doesn’t happen in the lab, the skunkworks or the strategy off-site. It doesn’t happen in the garage of a genius, nor does it happen when a government task force comes up with an innovation blueprint. Innovation might happen afterwards when the products of everyone’s labors are used by others, but there are quite a few good projects and initiatives that are easily forgotten in a few years.

What about all the patents? According to the U.S. Patent office, over 350,000 new patent applications are filed every year with less than 200,000 patents secured – but a patent is no guarantee of innovation. U.S. registered Patents in the last few years for the “Insect Death Ray”, the “Beerbrella”, (illustrated at left), the “Flush Toilet for Dogs”, and the “Electro Shock Game”, are interesting, but can they be described as innovations? They may be useful as entries in the Museum of Obscure Patents, but I question if they are innovation.

According to Richard Maulsby, director of the office of Public Affairs for the US Patent and Trademark Office, “There are around 1.5 million patents in effect and in force in this country, and of those, maybe 3,000 are commercially viable.” (Karen E. Klein, “Avoiding the Inventor's Lament,” Business Week, November 10, 2005)

If someone invents something that no one buys, did innovation occur?

A good analogue to that question, surprisingly, can be found in metaphysics. In the early eighteenth century, the philosopher and developer of “subjective idealism” George Berkeley introduced the idea of “To be is to be perceived”. His ideas are usually introduced with the question, “If a tree falls in the forest and no one hears it, did it really fall?”

Rephrased by Charles Riborg Mann and George Ransom Twiss in their 1910 book,Physics, the question became easier to answer, "When a tree falls in a lonely forest, and no animal is nearby to hear it, does it make a sound?” When addressed as a physics question versus a metaphysical question, the answer is straightforward: Sound, as explained by Mann and Twiss, is made up of three things:

A source of waves – such as a tree falling and creating vibrations as it hits the ground.
A medium for those waves to travel – such as the air
A receiver – such as an ear, which translates changes in air pressure into what animals perceive as “sound”

Without any animals around to hear the sound, there are only rippling changes in air pressure – no actual sound has been created.

Much like sound in a forest, innovation requires three things:

A source of innovation – a person or a team that is motivated enough to not only to come up with good ideas – but to develop them and influence others to follow.
A medium for their ideas to travel – such as the marketplace, writing, broadcasting, the Internet, classrooms, churches or any other gathering of people.
Receivers - People pay for the innovation, who will change their lives, collaborate with the source, give up something in order to innovate. The more people who receive it, the more innovative it becomes.

And just like the theoretical forest with no animals to listen – if no one adapts the new idea, process, concept or machine – innovation has not occurred. Put another way, “If someone doesn’t pay for it, then it didn’t happen.”

Innovation then, happens when others do it. When customers buy a new technology, when a community stops doing what they did before and begins using a new rule of behavior, when an old paradigm is abandoned for a new one – that’s when innovation happens.

Innovation occurs, not when a new idea or invention is discovered, but when everyone else innovates.

This all suggests three conclusions,

In order for innovation to happen, society must agree to that innovation – in effect, to subvert the formerly agreed to rules and participate in that innovation.
Innovators are persuaders as much as they are inventors – in effect, they must persuade others to innovate.
We all have to start innovating. Now.

What is innovation, really, and how do we get some?

2009-09-28T14:08:00.001-05:00

Innovation is both more difficult and less mysterious than we have been led to believe.

Innovation goes far beyond the laboratory - far beyond Silicon Valley startups, institutes or technology incubators. Innovation is less an activity or product as it is a lifestyle or way of thinking. The best innovators are able to change their frame of reference, see a system, a process or a problem in a way that few others can - then find ways to manipulate, change and ultimately improve what they see. And their innovation can occur anywhere, anytime – lab or no lab.

Innovation can be high-tech; but more often it happens at the level of an individual charting a new path for their life, a company creating a new business model or a new way to sell to their customers, an organization finding a more direct path to their objectives. Innovation isn’t just the creation of a new technology, but also the everyday thinking required of anyone to survive and succeed in a rapidly changing environment.

Anyone can innovate and everyone must innovate…every day.

Too often, innovation is described as something done only by magical geniuses. Stories dwell mostly on the flash of insight, or "Eureka" moment. How many profiles of innovative companies describe the beginning with a brilliant ideas that led to great success? Scott Berkun, in his marvelous book, The Myths of Innovation, describes this as "They myth of epiphany"

"Even if there existed an epiphany genie, granting big ideas to worthy innovators, they would still have piles of rather ordinary work to do to actualize those ideas. It is an achievement to find a great idea, but it is a greater one to successfully use it to improve the world."

I worry that too many people are waiting for the "great idea" to solve their problems. For every Fortune 100 company that started from a brilliant invention in a garage - there are millions of people with great ideas that never went anywhere. And yet, entire industries have been built up to serve the faith of ideas. Consultants, executives and businesses spend money and time to brainstorm, to elicit and evaluate new ideas. Investors often make decisions based on a valuation of an idea or business model. Politicians are evaluated by voters based on the perceived value of their ideas.

And yet, the success of the company or the government is only partly determined by the quality of the ideas. Ultimately, inventors are only successful if someone is willing to pay for their invention. Businesses become profitable not because they have a great business model, but because they persuade enough customers to pay more for something than it costs. Politicians become good leaders through competent management, sound decision making, and quite a bit of slogging back and forth in order to persuade people to work together...the ideas they sold during the election are often left behind or reworked once they enter office.

Sit inside a coffee shop and you can hear any number of brilliant ideas. But unless those ideas are turned into something real, the ideas are worth less than the coffee.

The best ideas don't win. Good ideas that are used for actions, products and new behaviors can win...sometimes.

Think about the most successful companies, the most successful leaders, the most successful countries. Did they have the best ideas? Or did they have good ideas that they translated into good products, services, markets, companies, laws, governments, and treaties. If you look close enough, you can find any number of really bad ideas that those successful entities have used to succeed despite themselves.

So why do we think that ideas are so valuable? Why do otherwise rational people believe that the best ideas will save their company, their country, their family?

Perhaps it's because ideas, brainstorming, planning are much more fun than the reality of innovation. The reality of innovation is much like the reality of scientific discovery - as exciting as it is to imagine how something works, that imagining is only part of the process.

In very broad terms, the process known as "the scientific method" can be broken down into the following steps: Observation, Hypothesis, Testing/Experiment and Evaluation. Innovation follows the same process:

First, in order to innovate, it is necessary to Observe reality as closely as you can to discover what is currently happening.

Second, the innovator gets to have fun with ideas - (s)he forms a Hypothesisof what might work better.

Third, that hypothesis needs to be tested in an Experiment prototype or pilot, where a small form of reality is compared to the hypothesis.

Fourth, measurements from the experiment are used to Evaluate the original hypothesis - did it do what was expected? Can that hypothesis be changed in order to affect the desired change?

Mysterious? not really. Both scientists and innovators follow a process, evaluate data and find new answers to old problems. Science and innovation isn't magic, it's just a way to find the truth - about physics, about business, about politics or about how we live - and then act on that truth in a better way than before. As the Harvard business professor and author Theodore Levittonce said, “Creativity is thinking up new things. Innovation is doing new things.”

Easy to understand, but quite often hard to do…and yet, innovation can become a little easier when faith in "the great idea" is put aside - and "good enough" ideas are put to the test of a scientific or innovative method.

October 19th Innovation Roundtable

2009-09-17T11:20:00.005-05:00

How are we going to innovate when everyone’s hiding under their desks?

Markets are tight and unforgiving. Budgets are almost non-existent and customers scarce.

Trying something new isn’t exactly the easiest thing to pull off right now. And there are so many reasons not to innovate. But in a market where everything has changed – where capital is difficult to obtain, energy uncertain, and customers reluctant to buy. Companies that do not innovate will not thrive.

So what do we do now?

The second of a series of Business-to-Business roundtable summits on October 19th will focus on implementing innovation – how to effect change in individuals, in processes and in organizations.

Go to the Roundtable Overview to learn more.

Experience: Friend of Foe to Innovation?

2009-09-01T15:53:00.004-05:00

At the heart of innovation lies a difficult paradox. The greatest obstacle to innovation is experience. At the same time, experience is essential to make innovation happen.

When someone has experienced a process, a market and product – and understands what works, what doesn’t, what is reasonable and what is impossible, it is rational to view any new approach with a great deal of skepticism. If something worked before, it is only logical that it will work in the future. And it is reasonable to then avoid or even dismiss innovation. A lot of crazy and wasteful ideas are avoided when experienced people are in charge.

And yet… before recent times, it was foolish to believe that people could fly. If someone managed to fly, it would never be economically viable. Given such a tangible reality, the more reasonable course of action would be to ignore any new developments in aviation and concentrate on building faster trains or ships.

Going to the moon, of course, was ridiculous and obscenely expensive to consider, and satellite-based navigational systems were the stuff of dreams, not serious business plans.

At one time, offering free education to all children was seen as an unnecessary expense with little meaningful return and perhaps even a corruption of working class values.

Segregation was an accepted practice in the U.S., and only the most radical would consider that an African-American would ever be able to eat a sandwich at the same lunch counter as a Caucasian, much less become president.

Of course, for every innovation like flight, or desegregation, there are any number of ideas, good and bad, that never become meaningful innovations, usually because experienced people are certain that they are impossible, impractical, or even irrelevant. Experience can stop innovation with the most solid arguments:

It hasn’t worked before, it’s not worth trying it again.
We’ve always done it this way before, why risk making things difficult?
Why change, technology doesn’t fundamentally change things, it just improves or complicates them, why not just add on to what we already have?
Let’s not cannibalize what we already have – our customers don’t really want that much change.
People will never really change, why even try?

And for a while, the experts can be right. Quite often the same practice can and should be repeated while new ones ignored or put off. After all, most companies only start to make money after they’ve repeated a process or sold a product many times. If everything were always changing, modern capitalism could not create anywhere near the wealth it does today.

But nothing lasts forever. Change always happens – eventually. The short-sighted arrogance created by experience can trick people into believing that change can’t happen. The challenge is to perceive opportunities for improvement, imagine a different world, understand that no one has all the answers, then make something happen – even when most experienced peopleknow that it’s impossible. A couple of currently evolving examples include:

Electric cars? The are too expensive, too strange and GM found it to be impossible to make a practical electric car that could be sold for less than $50,000….
and yet at least 5 models of electric cars are expected to be broadly marketed in the next two years while a $23,000 electric gas hybrid, thePrius was in the top ten list of cars sold in July of 2009 in the US.
Solar Power? Too expensive and impractical….and yet the market for solar power grew by about 40% a year between 2000 and 2005, reaching about $11 billion. (source: the Economist)
Web based social networking? Just a kids’ toy – no one will use such things for serious business…and yet 95% of companies use LinkedIn as a primary tool for find employees (source: Jobvite Social Recruitment Survey ), and the fastest growing segment of Facebook users is women between the ages of 55 and 65. (source: Inside Facebook Blog)

In each case, the experienced view that these innovations can’t work is being revealed as invalid. Does that mean, then, that only non-experienced people can innovate?

Actually, experience is essential for innovation – but the arrogance that can come from experience is not. Beginners can be very good at understanding how something might be innovated – but without a deep appreciation for how things work, it is very difficult for them to actually implement something useful. Innovators aren’t beginners but they behave as if they are. Usually, they have or acquire in-depth experience – and at the same time always look at their products, their organizations and their customers as if for the first time.

They have what is called Shoshin in Zen Buddhism, or “Beginner’s Mind”. This state of consciousness occurs once a certain level of mastery has been achieved, when it is possible to be open to possibilities without preconceptions, to be humble, and to see things as they truly are – not as we assume or want them to be.

Beginner’s Mind is experience without arrogance.

So how does someone with experience acquire a “Beginner’s Mind”? There are any number of ways to get there. Consultants and advisors can help give teams a new perspective. Studying other industries where one does not have experience can help bring new perspective. Talking to customers, partners and suppliers and trying to understand how they perceive the process is also a popular method for getting beyond the biases of experience.

Sometimes, Beginner’s Mind can emerge from crabbiness. As my colleague Buckley Brinkman recently put it, “In order to change things, I have to be irritated – not miserable, not in a good mood – but almost cranky.” If one is too unhappy, one is resigned to the way things are. If one is too happy, there’s no reason to change. If someone is tetchy enough, they can see things for what they truly are, recognize the imperative for change, then do something about it.

Innovators are experienced people who are able to defy the arrogance of experience. They may be irritated, but they are certainly willing to change something when it makes sense. To innovate is to see things for the first time.

One Year Blog Anniversary!

2009-08-21T17:26:00.003-05:00

Thank you, everyone who has followed this blog. After one year of writing posts, hearing comments from subscribers, and continuing to hone ideas around innovation and marketing, I continue to be excited about working in the "blogosphere". After learning so much about blogs and blogging in the last year, I finally feel ready to be a beginner blogger.

Although I plan to continue posting blogs at this address, I encourage all my subscribers to change their subscriptions to my new and improved web site/blog address: www.bransonpowers.com. If you go to that site and subscribe, I will manually remove you from this list so you only receive one e-mail per posting.

Why switch? The new site, which was created in WordPress, allows for a design that is easier on the eyes, and much more pleasant to follow. It should also be easier for readers to comment on what they read.

If you like what you see, please also feel free to tell your friends, colleagues and family members to sign up. I look forward to everyone's comments and feedback.

Gunnar

Jump the Groove with Beginner's Mind

2009-08-19T13:38:00.001-05:00

Innovation is both simpler and more difficult than most realize. It’s difficult, as it involves risk, change and the unknown. It’s simple, as innovation is as natural to people as breathing. It’s what human beings have done since the beginning of time. But quite often we forget how to do it, so we rely on innovation processes.

Innovation doesn’t have to be a 2-step, 6-step or 10-step process. It doesn’t require specialized techniques, experts, off-sites, focus groups, task forces, laboratories or even “skunk works”. All these things are useful, but the process is not innovation – it’s just process. A mad genius, an expert or a task force can innovate, but so can regular people in their everyday work.

Quite often, innovation is seen primarily as an expensive, risky and time consuming activity that only big government or big business has the resources or patience to undertake. Entrepreneurs, with their addiction to risk are also known for innovating – but only by working out of a garage, mortgaging their house, running up their credit cards and more often than not – failing. Only crazy people and well funded companies innovate.

Special innovation processes are popular. Even though they can be expensive and time consuming, they help people feel a little less risky and a little more reasonable. The process helps everyone feel more “normal”.

Of course, process, techniques, teams, tools and special work spaces do help. A skunk works is a very comfortable environment for innovators to work. Getting away from the office with a good facilitator can help stimulate new thinking. Working through a formula or process can give people comfort when facing the unknown. It can also help determine what is likely to work and what won’t before too much money and time is invested.

But it is important to understand that most of these innovation activities are not what makes innovation happen. Innovation is not an activity, a process, a building, or a department…

…it is a way of thinking, a way of seeing, a way of living.

When people are not innovating every day, they tend to behave like a scratched vinyl record. Before explaining this metaphor, it may be helpful to explain vinyl records to anyone who is not familiar with this older technology.

Before compact discs and MP3 recordings became commonplace, most music was distributed by vinyl records played on a rotating turntable. Sound was encoded on the record on a long groove that started on the outside of the record and spiraled into the center. The groove itself had bumps and valleys inside it that could be read by a small pointed needle or stylus that tracked through the groove and transmitted the sound ultimately to the speakers. The needle was attached to a flexible tone arm that allowed the needle to be dragged through the grooves at an even speed.

When the vinyl records scratched or accumulated dust in the grooves, there was a tendency for the needle to get “stuck”. The music would play normally up to a certain point in the song, then, unable to continue, the needle would be pushed back to a previous point in the song. The song would continue until it hit the obstruction again and started over once more.

If nothing was done to fix the problem, records would continue to play the same few moments of a song over and over again.

There were a couple of ways to solve the problem. Listeners could hope that eventually the needle would push the obstruction out of the way and the song would continue playing on its own. Occasionally that would work, but it would often take a long time to get there. More effective were a variety of strategies to jump the groove; to get past the obstruction by hopping over it to the next section of the song. Those strategies included lifting the needle off the record and moving it past the obstruction, hitting the side of the record player so the needle would “jump” to the next groove or even stomping on the floor so the vibration would jump the needle for you.

In order to innovate a process or product, it’s important to find a way to jump the groove as well. Just as the record player gets stuck doing the same thing over and over with the same disappointing result, companies and organizations often get stuck as well. Perhaps a product no longer sells as well as it used to no matter how hard the sales force works. Perhaps a financial system is no longer providing safe leverage to businesses. Perhaps energy sources aren’t as reliable or as safe as they once were. In every case, the immediate instinct is to try doing the same thing until eventually the needle becomes unstuck by itself. Alternatives are usually seen as too difficult, too risky or perhaps even impossible.

The job of an innovation process is to jump the groove. Just like the record player, once an organization is able to see the problem from a different context, once they are able to jar their sensibility in such a way that they can see alternatives, then innovation is not only possible, it becomes a more rational, safe, even accepted activity. The best processes focus on pushing people out of their current thinking and into a place where they can start over again with a “beginner’s mind”.

As it was eloquently put by Shunryu Suzuki-Roshi, ”In the beginner’s mind there are many possibilities, but in the expert’s there are few.”

But jumping the groove doesn’t have to wait for a special brainstorming session, a project, or for the skunk works. It can be as simple as looking at an old problem for the first time. Instead of assuming that the needle must progress on a straight path through the groove, maybe there is a way to jump out of the problem. Just as Toyota’s Kaizen or Continuous Improvement empowers individual employees on the assembly line to find ways to eliminate waste, improve a process, or even stop the assembly line if something isn’t working, if everyone is encouraged to look at their work for the first time, every time – innovation becomes as natural as breathing.

At least, that’s how habitual innovators do it. I doubt that Thomas Edison, Richard Branson, Steve Jobs, Albert Einstein, Thomas Jefferson, and many other innovators ever had trouble jumping the groove in their minds. To them, every problem, every process, every business was a new one. When they looked at something, they looked for the first time, no matter how much experience, knowledge or success they had in the past. That’s how they are able to re-imagine and rebuild answers to questions of products, technology, physics, government. They jump the groove, not by doing what was done before, but by looking at the problem for the first time.

Surprisingly, solutions that are found through everyday innovation are quite often far less expensive and far less time consuming than the alternatives. There are very important innovations that take a significant amount of capital, planning, time and process, but so many opportunities abound for everyday innovation as well. It may be time to encourage everyone to look at their problems for the first time once more.

Beware the Cover Art

2009-08-07T21:52:00.007-05:00

Change is really hard.

Whenever one considers changing a system, even if it's to innovate and improve that system, there are always a number of good reasons to avoid the change altogether and keep things as they are. Is it worth the effort, the risk and the cost to change something that works now? Will the old way be missed? Will something valuable be lost if there is change? These are all legitimate and often used questions that can and occasionally should stop innovation.

My favorite reason - often persistent, often misunderstood and always ultimately wrong - is the cover art.

In the 1940's and 1950's record companies began to illustrate the covers of records to help sell their products, differentiate performers, and catalogue collections. In the 1960's, 1970's and 1980's, record companies increasingly referred to the cover illustration as "art". In many cases, the cover art seemed to transcend the record album itself. Anyone listening to music in those decades remembers certain album covers in detail and with fond reverence - in many cases, part of the experience of listening to music was related to the imagery on the cover.

A stand out example would be The Beatles' Sergeant Pepper’s Lonely Hearts Club Band, designed byRobert Fraser, Peter Blake and Jann Haworth with a complex and expensive collage of celebrities past and present (the cover cost 100 times as much as the average cover of the time).

The Cover Art became so important to performers and their record labels that some designers and visual artists became known predominantly for their Cover Art, such as the design team Hipgnosis (Pink Floyd's The Dark Side of the Moon) and Roger Dean's work for Yes and Asia. It almost seemed as if cover art had become a separate form of art, collected and in many cases even framed by enthusiastic music fans.

Despite it's value as a branding device and marketing tool, the art on the cover of the record was ultimately of secondary importance. People bought records so that they could easily listen to the music inside – not because of the wrapper. The cover art may have helped encourage them to buy, but it was never the primary reason they did so.

When Compact Discs supplanted vinyl LP's in the mid 1980's, many skeptics of the new format pointed out that a smaller disc size did not allow for the same quality of cover art. In addition to concerns about replacing an existing library and a loss of some sound characteristics of vinyl recordings, music buyers wouldn't accept the format in some part because they wouldn't be able to enjoy the art they loved.

And yet, by the mid-nineties, vinyl records had become a niche product revered mostly by nostalgic collectors, but not a serious part of the music industry. In the beginning of the 21st century, when MP3 players such as the iPod came along with digital music downloads and almost no room for Cover Art, it only took a couple of years for mainstream consumers to throw away their love of cover art and buy songs without it. It turns out that none of the reasons for staying the same, including the cover art, are compelling enough to stop change.

The record companies were selling the vinyl records wrapped in cover art. The "art" was a powerful tool from marketing but at the end of the day, their customers were buying music - not records or art. The instant someone offered them a significantly better delivery device for the music, they would switch.

How important was Cover Art to the buyers? They liked it. They put it on their walls, they collected it. But they didn’t really ask for it; they never bought it.

Cover Art occurs in almost every mature system, whether it’s the record industry, a government, a car company or a bank, "Cover Art" can be identified by the following factors:

It is something offered that is incidental or even immaterial to the problem a customer is try to solve. In the case of records, the customer was trying to fulfill their desire to hear music – not look at art.
It is mostly decorative – a way to make something more palatable, more slick, more exciting – but it does not significantly contribute to the problem a buyer wants to solve.
It is mostly used to differentiate, sell or brand a commodity product. (Branding and advertising can be very important for selling something, but when presented with an alternative to a sales pitch, buyers almost always go with that alternative, even if it costs them more money. As an example, consider television advertising. Most people enjoy well produced commercials, and yet will pay extra to skip commercials through DVR’s and premium cable channels.)
It is expensive, time consuming and requires specialized skills to produce/deliver.
The customer will not pay extra for it and won’t go out of their way to get it independently of the primary offering.

Cover Art occurs in all sorts of companies. For example, up until the 1990’s airlines tried to differentiate themselves based on the quality of their hot meals served during flights. Serving a hot meal on a moving airplane is a very difficult and expensive thing to do – even when the food is less than good. Initially, in-flight meal service helped airline passengers feal safe and pampered during flights - as if flying was just like taking the train. But as air travel became a common part of life, that assurance became unnecesary. The meal is incidental to the main need of a passenger – to safely and quickly get to their destination. When someone offered a more attractive alternative without meals, they were willing to switch.

While most airlines continued to spend money on their hot food programs, Southwest Airlines offered peanuts for food and a less expensive ticket price. Despite their lack of “Cover Art” hot meals, today they are the most profitable airline in the history of aviation.

Computer software and hardware makers have recently been surprised by the market’s embrace of small, less powerful computers that rely on Internet based applications and data storage. They have long thought that their customers wouldn’t give up the Cover Art of abundant features, massive hard drives and large numbers of applications. But customers don’t buy massive hard drives – they buy a way to send e-mails, type up a letter, handle their bank account and surf the Internet. As soon as someone offers them a way to avoid buying a massive hard drive, they embrace it.

Where else is there cover art? Credit card companies have been offering elite gold, platinum, and black plastic cards for years. Although people love the status of the different colors, it is incidental to what they are buying – a cash flow management system. That status is very important, and it has been a very successful marketing strategy for the commoditized offering of credit. However, if someone offers a better cash flow management device that does not include the status Cover Art, will the platinum card be as endangered as an LP or in-flight meal? Are there other places that platinum card users will look for their status symbols in the future?

There are numerous examples of Cover Art throughout industries and organizations. Valuable to any company contemplating change, an assessment of the potential Cover Art can reveal significant opportunities for innovation. Customers don't buy marketing (cover art) or delivery devices (records), they buy a solution to something (music). Even though marketing and delivery devices are essential for a successful business to sell to their constituents, they should never be confused with products and can always be trumped by a better solution.

And therefore, robust and mature Cover Art is a leading indicator that innovation and change is possible and even likely. Does your company offer the best Cover Art in your industry? Are your customers open to better delivery options?

Is it time you innovated?

Want innovation? Start laughing.

2009-08-03T00:11:00.005-05:00

Laughter seems to be closely linked to innovation. When teams are solving problems, when individuals are able to overcome their fears and create solutions – more often than not, they are laughing. Breakthroughs and laughter often seem to go hand-in-hand. And when no one is laughing - innovation seems to slow down as well.

When Brian Marshall of the Alliance for Strategic Alliance ran a technology company in the '90's, his engineers, “worked 12, 16, 18 hours a day, sleeping in their offices…and they were high-fiving each other, telling jokes, having a good time. We just gave them a deadline, near impossible objectives, some t-shirts, beer on Friday nights and an unlimited amount of free soda pop – and they were in heaven.”

And they delivered innovation. Without the laughter, very little risk taking, developing, or building takes place. According to Patrick Lamb, Founding Member of Valorem Law Group, “you know when people are in survival mode when they aren’t laughing.”

David Johnson, CIO of Jones Lang LaSalle sees tangible risk to this loss of fun in his development teams, “It is hard to hold on to your best people when they’ve been so demoralized by cost cutting, project cancellations, and an ever increasing load of administrative work. As the markets improve, they will be tempted by new jobs in new companies that let them innovate. For this type of employee, change is a good thing.”

But maintaining a sense of humor may be a good place to start mitigating that risk. According to Buckley Brinkman, innovation consultant of Launchpad Partners, “the fun thing is trying to figure out how to get people engaged even when things are tough. The ship is burning; we’re five miles from shore, its taking on water, but stay anyway.”

Fun and laughter can be managed, and even encouraged. According to Patrick Lamb, “The people who run things need to be out there walking, talking and joking. Take a fair amount of time doing stuff that gets people comfortable. If you make it easier for people to laugh, they will laugh.” If they are laughing, they can start to solve problems.

According to Kevin Conlon, president of Conlon Public Strategies, “the intangibles of values and culture with our team and our clients make a big difference when times are difficult. We’ve even had to say no to client opportunities that didn’t fit – but staying true to our shared values and chemistry helps us weather the difficult times.”

John Ahlber, president of technology consulting firm, Waident, always tries to figure out if a candidate enjoyed his colleagues’ sense of humor, by getting people together over a meal and allowing everyone to joke around a bit in the presence of the candidate. If the prospect laughed or even joined in with their goofiness, it was a leading indicator that there may be a strong cultural fit. Laughter, for Waident is almost a requirement for collaboration.

Shared values, fun and laughter can help promote more innovative teams, but it can also indicate when people are starting to work on the problem instead of being paralyzed by it. As we begin the second half of 2009, more and more business leaders seem to be joking about how difficult business is – instead of just complaining about it or worse yet, denying that there might be a problem. This may suggest that the economy will be able to improve in the second half of 2009.

Are you laughing yet? Maybe it's time to start.

(This blog post is the final of three excerpts from a Branson Powers, Inc. B2B Executive Innovation Roundtable that was held on June 19th, 2009. If you are interested in reading the full report, you can view the pdf file. If you are interested in participating in future roundtables, please contact Gunnar at gbranson@bransonpowers.com.)

Fear and Innovation

2009-07-24T23:26:00.002-05:00

There’s quite a bit of fear in the economy today. But that can be seen either as an advantage or a disadvantage for innovation. In some ways, it’s both.

Fear pushes companies to try new ideas and new approaches. As one leader of a small business recently told me, “We would be out of business three years ago if we hadn’t innovated.” Most innovators I talk with list fear as a source of strength. If you are losing customers, if money is scarce, and there is no other choice; you have to innovate.

At the same time, more than lack of capital, lack of good ideas, or lack of economic imperative; fear of change can be the most stubborn impediment to innovation.

According to David Johnson, CIO of Jones Lang LaSalle, “Middle managers think Innovation is such a big word. Innovation is too scary.” Employees have their fill of change right now, and innovation is just one more demand for change.

And fear can cripple innovation. Different people react differently to an environment that challenges their existence, and many will deny a new reality, resist change, and sometimes become paralyzed. As Tony Reynes, partner in a recruiting firm that is re-writing their entire business model, put it, “Some people just freeze up but I think a successful innovator says, “Okay, I’ve got to do something different.” Everyone is facing the same fear and everyone has the same opportunities. The innovators act on the new environment.”

Tracy Williams, a leader in agricultural ventures and former military officer, pointed out that the responsibility of a leader is to create a feeling of safety, to help those who are paralyzed take action. As he put it, “Look, part of my job is keeping my people safe from the people on top. Go make a mistake. As long as you haven’t done anything illegal, as long as it makes business sense, as long as you tell me when things go wrong, I can get you out of anything you get into. So let’s go do something.”

Another, more Machiavellian approach may be to avoid telling everyone that they are innovating. With some projects, it is possible to position the work in such a way that it does not seem to overtly threaten the status quo. Eventually, innovation always changes things – but to avoid unduly frightening the people whose work lives will change some innovators will use a Trojan Horse approach.

The Trojan Horse approach presents something new as if it were merely a slightly modified version of something old. The iPod, for example, was really just a digital version of a Walkman. A personal computer could be seen as just a typewriter with a screen. A car as a horseless carriage. Televisions, at first, were perceived as radios with pictures. Look at most successful innovations, and likely you will also find an analogue to an older technology or process that was used to get people comfortable with the idea.

At times, the Trojan Horse approach goes well beyond offering comfort. It can also cloak the true implications of an innovation - forcing us to change our lives without realizing it. Few people buying a computer in 1990 were buying into the complete transformation of our work and personal lives that took place in the next 15 years. If companies knew that the Internet would force them to share more information than they had ever shared before, would they have started creating Internet sites?

According to David Johnson, “anytime you are saying that you are innovating, you will get an initial buzz. But, as soon as everyone sees it as changing what they do, they become very opposed to it. So, when there is the slightest problem with developing a new innovation, everyone jumps to, “Aha, I told you this was never going to work! And the project gets killed.” Instead, try “…unveiling bits and pieces of it at a time. Emphasize how a certain function is made simpler, but avoid talking about any larger plans or potential for industry change.”

Jonathan Rutman of CB Richard Ellis uses a three ring binder to make fear of innovation less of an issue, “Every step of the process will go into this binder, every study, every point of data, and every decision we make will be captured on paper and put into your binder. Fear can be managed if you package it.”

But if you don’t use a Trojan Horse, it is important to acknowledge fear upfront, to be honest about what the real dangers, the real risks of any new project might be. Instead of pretending that there is no danger, there is a real need for innovators and leaders to be able to say, “This is difficult. It could fail. Let’s see what we can do to make it succeed.”

Brian Marshall, a consultant on innovative sales strategies, offered a different way to think about fear that could help explain why some are able to innovate now and others cannot. “Fear is nothing more than pain that hasn’t happened yet…the most compelling emotional motivator is pain – more so than fear.” The immediate pain of changing something right now will always trump the fear of something that might happen.

An example Brian used was the US auto industry, “The unions are now suddenly the most innovative group of people you will ever meet – but it may be too late. They are now able to make substantial change because they are in tremendous pain. The fear they felt two years ago was not enough to overcome the immediate pain of change.”

“What is innovation? It is a direct threat to the status quo. So those who are a part of that status quo will kill innovation if they see it threatening how they do things now. When they start to feel real pain, then they become the champions of change and innovation.”

Brian continued, “Great leaders and drivers of change are those that can take the fear of the future and bring it into the pain of the present before it’s too late.”

Fear is a powerful motivator for innovation, but it must be controlled, acknowledged, and worked with to overcome the natural resistance to change.

(This blog post is an excerpt from a Branson Powers, Inc. B2B Executive Innovation Roundtable that was held on June 19th, 2009. If you are interested in reading the full report, you can view the pdf file)

Uncomfortable Innovation

2009-07-17T14:24:00.009-05:00

In order to change something, an innovator has to be comfortable with new ideas and at the same time be uncomfortable with the status quo. They have to be uncomfortable enough to want to change it – and willing to use untried approaches, unfamiliar skills, and even the wrong tools to make something better.

Tony Reynes, a principal of Tesar Reynes made this very clear to me recently when he said, “Instability and comfort with being off-balance certainly is a big part of why I’m an innovator.” Being comfortable with discomfort may be a crucial character trait for innovators.

Patrick Lamb of Valorum Law Group helped clarify the importance of discomfort by describing his new exercise regimen. His physical trainer requires Patrick to stand on an unstable platform whenever he performed an exercise. According to the trainer, the instability of the platform helps to build core muscles that are constantly compensating and trying to maintain some kind of internal balance. Translated to business and innovation, that same ideal holds, “if we are able to operate in an unstable way, we become stronger and better able to emphasize the positive sides of change.”

If people are unable to accept discomfort, they may not be able to innovate. Kevin Conlon of Conlon Public Strategies pointed out that traditional printers in the seventies and eighties, when negotiating new contracts with newspapers passed up the opportunity to take control of emerging electronic printing and remote printing technologies. Those printers, however, were very comfortable in their skills as traditional trainers. “They were given the opportunity to embrace new and unfamiliar technology – and instead opted for contracts that allowed them to be traditional printers forever with no burden to evolve professionally. There are now virtually no traditional printers at any of the major newspapers.”

It should come as no surprise then, that innovators often seem to straddle multiple worlds, multiple cultures, and quite often don’t completely fit in. They often don’t have the standard credentials or formulas for a problem – and therefore by default look at things in a fresh or unique way. And even when they know the formulas well, they are willing to put them aside.

People who are comfortable with how things are done right now, have little reason to change. The rational course of action for someone in that position is to avoid changing what they are doing, even if there's a chance that things could become very uncomfortable in the future.

Jonathon Rutman of CB Richard Ellis has pointed out, “Those people who are the most successful in an old system are the last to see the reason to change – or to make any kind of change. Why give up what you have?”

Innovators are better able to find new solutions to old problems, not because they choose to – but because they have to. They are too uncomfortable to continue as they are.

Innovation needs to be uncomfortable.

Commercial Real Estate Innovation

2009-07-10T12:00:00.007-05:00

Many of my friends, colleagues and clients work in the commercial real estate industry. Even after the credit markets come back, commercial real estate will be engaged in some exciting and fundamental transformation. A comment left on my real estate blog at The Real Corner elicited two interesting questions from Mark Waligora of Pinetree Commercial. He asked,

"What are the trends that we can anticipate and take advantage of as stakeholders (principals, brokers, lenders, tenants) during this transformative cycle? Where are the hackers in our industry?"

As I attempted to answer the questions, I decided to focus on two key trends that help me to understand what is happening and what may happen in the future. There are, of course, many macro trends affecting this sector; demographic trends, changes in technology, economic growth, debt and equity, legal structures and a new regulatory environment are all very important. But I believe that these two sometimes overlooked trends have a tremendous amount of potential to transform commercial real estate. They are:

Office and Retail need less space per person.
Sustainability and Energy Use issues will not go away.

To start with, it is time to acknowledge that that square feet use per person is on a downward trend - both in office space and in retail - and is unlikely to jump back up once the recession is over. The second baby boom will help offset the loss of square footage demand as new workers enter the workforce, but as the use of the Internet, mobile networking, flexible office space and on-line retailing only increases, population growth cannot keep up with the fundamental shift in how our society uses real estate.

When it comes to office space, why do businesses need to have large private offices when the average desk chair is only occupied 30% of the time from 9 to 5 Monday through Friday? They don't - and more and more businesses large and small are reducing their square footage per person. It's no longer a flaky idea to have flex office space and telecommuting. With everyone using a laptop computer and a cell phone, offices no longer house all the tools for people to work. The remaining purpose of office space may ultimately be to conduct meetings and brainstorming, not sitting at a computer and taking calls, that can be done in any number of places. Commercial real estate service companies have been advising corporate clients for quite some time on how to better use - and ultimately decrease the total amount of space they use for offices. Owners of office buildings that understand that will have far more luck keeping their buildings occupied.

In retail real estate, some of the most imaginative, innovative and frankly brilliant real estate pros work in retail. However more and more people now use the Internet for entire categories of purchases - such as books, electronics, groceries, and clothing. Even though there will always be a need for some form of in-person retailing - it will require a lot less space. Retail real estate must come up with another use for all those empty shopping centers - otherwise yesterday's community big box center will become tomorrow's community problem. For more on retail vacancy read this interesting overview in a blog regarding "ghost boxes" here.)

Secondly, energy and sustainability issues will not go away - they will only become more important. A third of the energy used in this world and almost half of the release of carbon in the atmosphere is related to buildings. That means that real estate is equally as important as manufacturing and transportation when it comes to solving the issues of global warming and energy use. This is about more than getting a LEED certification on the corporate headquarters building. Every real estate investment and every lease needs to be looked at with energy use and carbon in mind - not because it's the right thing to do - but because it will have more and more of a financial impact on the profitability of that asset every year. Do not be fooled by temporary lower energy prices and a slow government's reluctance to initiate a carbon tax. This stuff is coming, and those real estate players - whether they are investors, developers, owners, brokers, managers or corporate users will get burned if they don't pay close attention.

At some point very soon, the environmental impact of a building may have as much importance as its location. The players that figure that out first will have the advantage.

Who are the hackers?

You can find them everywhere - they are the people who are trying to redefine their jobs and their companies - the tenant reps that are positioning themselves as portfolio consultants, the investment sales reps that are figuring out where the new sources of capital are coming from, and the owners, brokers, tenants and managers who are figuring out how to make the energy and environmental crisis work for them.

Why are they hacking?

Recently an industrial real estate guru and friend, Sam Foster, sent me his insight on innovation that is particularly relevant to that question,

"No one innovates until survival requires it. Yes, there are the neurotic few that can't help themselves, but for most of us, not so. Getting laid off and not being able to find another job requires one to innovate."

Real estate professionals, even if they still have a job, are seeing their old sources of income shrink or even dry up. When buildings aren't flipping every couple of years or companies doubling in size every couple of years, real estate, by necessity, has to figure out how to make a living again. Commercial real estate is a transaction business at its heart, and when the transactions slow down, the best people in the industry will work towards finding the next great opportunity.

It is not an easy time to work in commercial real estate, but it may be one of the most important times. If real estate professionals can solve for the two trends of diminished per person space and sustainability, they will go a long way towards building a brighter future.

What's Your Trojan Horse?

2009-07-07T11:45:00.005-05:00

According to the Kauffman Foundation, 78% of Americans believe innovation is important to our economic health. Western governments are trying to figure out how to stimulate innovation. CEO's speak eloquently about innovation as they strategic advantage.

And yet...

Most companies seem to be doing anything but change. Instead, they go the standard and sometimes necessary playbook that calls for laying off workers, closing lines of business, selling assets, and praying that the economy will change before they run out of money. Changing a business model or process, creating a new product or new market is often overlooked as too expensive or risky ventures.

And yet...

According to Dane Strangler of the Kauffman Foundation, (“The Economic Future Just Happened” 6/9/09), over half of the current Fortune 500 companies began during a recession, bear market or both. If historical patterns continue, this isn’t a time to wait. New companies, new technologies, new processes and new markets are always found in times of challenge.

And yet...

According to an executive I interviewed recently, “Middle managers think Innovation is such a big word. Innovation is too scary.” Employees have their fill of change, Innovation now seems like yet another demand for change.

More than lack of capital, lack of good ideas, or lack of economic imperative; fear of change can often be the most stubborn impediment to innovation. This suggests that it would be a strategic mistake for an innovator to tell everyone that they are innovating.

A key strategic tool for innovation is to position the work in such a way that it does not seem to overtly threaten the status quo. Eventually, innovation always changes things – but it’s important that those affected by that change are not unduly concerned or frightened.

Consider using a Trojan Horse.

In Virgil's The Aeneid, the Greek armies, after 10 years of trying to defeat the city of Troy, built a huge statue of a horse out of wood. The Trojans took the seemingly harmless but massive statue into their city. At night, soldiers from the Greek army snuck out of their hiding places inside the statue in order to take over the city.

The Trojan Horse approach, then, is to present something new as if it were merely a slightly modified version of something old. The iPod is really just a digital version of a Walkman. A personal computer is really just a typewriter with a screen. A car is really just a horseless carriage. A television is really just a radio with pictures. Look at most successful innovations, and likely you will also find an analogue to an older technology that was used to get people comfortable with the idea.

At times, the Trojan Horse approach goes well beyond offering comfort. It can also cloak the true implications of an innovation - forcing us to change our lives without realizing it. No one buying a computer in 1990 was buying into the complete transformation of our work and personal lives that took place in the next 15 years. If companies knew that the Internet would force them to share more information than they had ever shared before, would they have started creating Internet sites?

According to one executive I spoke with recently, “anytime you are saying that you are innovating, you will get an initial buzz. But – as soon as everyone sees it as changing what they do, they become very opposed to it. So, when there is the slightest problem with developing a new innovation, everyone jumps to, “Aha, I told you this was never going to work! And the project gets killed.” Instead, try “…unveiling bits and pieces of it at a time. Emphasize how a certain function is made simpler, but avoid talking about any larger plans or potential for industry change.”

If you are going to innovate – and therefore subvert the existing state of things – be ready to ride inside the belly of a wooden horse.

Customer Hacking

2009-06-10T02:08:00.001-05:00

From the moment you start selling a product or service, it is becoming obsolescent. Initially, you may solve a problem for a customer - you help them do something they couldn't do before - you do a better job at something than anyone else, but then things begin to change.

Customer expectations change - as your solution becomes the new floor for what is expected in the future.

Customer needs change - as their businesses change, as their objectives change, as they themselves change.

Markets change - as competitors figure out new ways to take business away from you.

How fast your product or service becomes obsolescent depends on a lot of factors - but it's as reliable as entropy, death and taxes that your product or service has an expiration date on the lid.

That's why everyone must innovate - not just if they want to succeed, but ultimately if they want to survive.

Thankfully, people are, by nature, adaptable...and so are your customers. More often than anyone wants to realize, customers are very good at adapting your product or service so that it solves their problem. In a process not unlike jamming a square peg into a round hole, customers will take what you give them, then adjust, support or work around it to get what they want.

For example, in the days of vinyl records, music lovers wanted to hear music, so they were willing to buy large and akward plastic discs that scratched and degraded easily, just so they could hear a song. Music lovers bought huge stereo systems to play the records, took over entire closets to store the records, they learned how to clean the record with special brushes, to gently handle the record by the edges and to delicately place the needle in the right groove. They even learned to bump the record player when the needle got stuck.

And record companies learned to help music lovers by giving them the same thing they already had, only a little better. They reduced prices by manufacturing poorer quality vinyl. They made the large discs more interesting by packaging them with "album cover art".

For decades, to love music meant to love vinyl records. The symbol or "brand" associated with music was often that of a record.

Customers were willing to use a technology decades past it's expiration date, not because it consistently and easily delivered good music - but because there wasn't anything else available - and they adapted to the existing technology.

And when they were presented with something better, such as CD's - it took less than five years for everyone to switch. When they were presented with something even better at delivering music on demand, the mp3 player, they switched even faster.

It is extremely dangerous to rely on customers' willingness to adapt. The moment someone has a better answer - the adaptation will end and they will abandon you.

But if you discover the adaptation first, your customers can guide you to innovation.

Asking customers what they want is pointless at best, and destructive at worst. When asked what customers want in the future, most likely they will describe a version of what they can get now - only with a little better quality, some slight changes in design, and at a much lower price. Surveying customers with direct questions around innovation can even help you persuade yourself not to innovate.

"Research shows that customers love album cover art, they even hang it on their walls; they'll never buy a small disc or a digital file."

So instead of asking customers what they want, perhaps you should observe how they are adapting your square pegs to their round holes.

The best customers to watch are the "hackers". By "hacking", I mean a certain kind of creative development practiced by computer giants such as Steve Wozniak or Linus Torvalds and all the behaviors, methodology and thought processes that allow them to develop new approaches to problems. Not to be confused with the criminal exploits of those trying to obtain credit card numbers or infecting computers with viruses, true hackers adapt whatever is at hand in order to create very useful products, services, and systems.

Jon Erickson introduces his book, Hacking: The Art of Exploitation, with the following:

"The essence of hacking is finding unintended or overlooked uses for the laws and properties of a given situation and then applying them in new and inventive ways to solve a problem - whatever it may be."

Substitute the word "innovation" for "hacking" and suddenly Mr Ericson's quote becomes a useful definition for innovation. At the same time, it's a useful model for the kinds of customer behavior you might be need to observe.

For example, when Harley-Davidson's business was pummelled in the 1970's by Japanese competitors able to deliver a better quality motorcycle for less money, customer "hacks" allowed them to find a new definition for their company, their products and their customers. Even as new bike sales continued to drop, their accountants were able to see that their after-market parts business remained strong. It became clear to the company that their best customers were customizing their bikes - "hacking" them to make them more personal.

The accounting insight led to a realization that they could innovate the motorcycle business. Instead of selling the best quality or the highest performance motorcycles, instead of rejecting the dark images of motorcycle gangs, they could embrace their hackers and become a premium lifestyle company. They could sell customization, club membership and the romance of an old-fashioned, rebellious, and incredibly loud experience. Motorcycle sales jumped upwards, along with branded clothing, accessories, tatoos, and of course, after market parts.

Despite some difficulties in recent years, the turnaround of Harley-Davidson remains one of the more innovative re-inventions of a company. All because they noticed how their customers were hacking their product.

Are there customers hacking your services or products? Are they using them in a different way than you think they are?

Find out, and you may be able to find meaningful - and profitable - innovation.

Sales Innovation - Go Beyond Benefit

2009-04-29T16:02:00.011-05:00

I love the truth.

The more I understand the truth of a subject, the better I can understand it. The more transparent a process, the more likely it can be made to work. The more honest a person is, the better I can trust them. Honesty and truthfulness are foundations for how society works and for how we all become better people living in a better world.

Very few would disagree with the statements above...and yet we all live and work in a pragmatic world, where shadings of truths, omissions, contextualization and emphasis can make things less than transparent, slightly misleading, a bit less true - especially when it comes time to sell something.

I'm not suggesting that selling is dishonest- but when one sells or tries to persuade, the accepted practice is to show, describe or even demonstrate benefits. Few people sell by telling a potential customer what's wrong with their product, service or idea. That's why a "pitch" for something describes the positive, downplays or omits the negative, and paints a splendid picture of how our lives, businesses and communities will be improved by those benefits.

It's not a lie, it's a pitch.

No one believes a lie...but no one really believes a pitch either.

That's one of the main reasons why advertising is steadily losing its power to sell...not because the ads are bad, quite the contrary, some of our best design, writing, photography, and acting are applied towards pitching products and services. It's hard to imagine better produced or better distributed advertising than what is seen today. But here's the problem: no matter how well produced, how entertaining and how well placed an advertisement, no matter how compelling the benefits described- customers know immediately that they are getting "pitched".

"Pitching" makes people more skeptical and it becomes more difficult to persuade them. Quite often, no matter how well produced, people will buy something despite the pitch, not because of it.

If someone tells you how wonderful they are - can they be believed?

Could it be that describing benefits isn't the best way to sell?

Here's a little thought experiment. Imagine a single woman meeting a single man for the first time. This hypothetical man is very handsome, has an Ivy League education, possesses a considerable financial portfolio and runs a successful company that builds schools for lower income children. If this hypothetical man, let's call him "Mr. Right", is interested in striking up a friendship with our hypothetical woman, ("Ms. Right"), perhaps leading to a romance and a long-term relationship how successful would the following sales strategies be?

Features: Mr. Right describes his background in colorful detail, with stories and accomplishments that prove how he is a valuable, charming, and interesting guy.
Benefits: Mr. Right describes the benefits of dating him. He could describe his passion for long walks in beautiful park land, meals in Parisian cafes, sweet nights watching old movies with someone special. He could talk about how he is so good with kids, how he can provide a stable economic future for his family, how he is a good shoulder to cry on, how he can make a long-term, loving relationship a reality.
Conspiracy: Mr. Right asks Ms. Right questions. He listens to her answers. He asks more detailed questions until he finds something about her life that he shares with her. He would then find out what Ms. Right wants to do tomorrow, next week, next month and perhaps for the rest of her life - and what might be standing in her way.

For example, Ms. Right might mention that she loves music from the 1940's but never learned to swing dance. Mr. Right realizes that there is something they have in common.

He says - "You know, I've always wanted to go to one of those retro dance places with a big band, but I'm a complete klutz - how does someone learn to dance like that, anyway?"

She says - "There are classes you could take."

Ever so delicately, our hypothetical couple will start to learn together the different ways they might learn how to dance a Fox Trot...and there's even a chance that they might go take a lesson together...and eventually dance together.

Which of the three strategies is more likely to bring Mr. and Ms. Right together?

The Conspiracy Strategy I described is all about getting on the same side as a prospect and figuring out how to collaborate together for mutual gain. As a colleague of mine, Buckley Brinkman described it recently, instead of defining a pain point for a prospect, then describing the benefit of your solution"...it should be about conspiring with them to solve a problem."

But conspiring with someone requires a kind of direct - at times even brutal - honesty about your self, your capabilities, and the potential obstacles. People only conspire with people they trust...and people don't trust you if you talk about how great you are.

This form of conspiring, of creating alliances with customers has long worked for individual sales people. "Rain Makers" or master sales people, whether consciously or not, have used this technique as long as there have been products and services to sell. But can it be scaled beyond an individual sales person with an individual customer?

Yes it can. The transformation of electoral politics in 2008 demonstrated that quite well. When President Barack Obama's campaign "advertised" through media, the Internet, and in person, the emphasis was not on the benefits, but rather on an invitation to join together or "conspire" to create a different government. In the process - constituents (or customers, if you will) began to join in the marketing of Obama - there was far more independent marketing than there was campaign marketing.

It's time for marketing and sales to innovate away from the dogma of benefits - and to move towards conspiracy and truth.

What is innovation...really?

2009-04-20T22:32:00.007-05:00

Innovation is far more difficult, yet far less mysterious than we have been led to believe.

In a time of global warming, energy shortages, recession, conflict and war, many now believe that innovation is perhaps the only way to solve today's challenges. According to a 2009 Kauffman Foundation study, 78% of Americans believe innovation is important to our economic health.

Innovation will allow us to build more sustainable communities. Innovation will help our countries back down from wars. Innovation will help struggling businesses thrive once again. Innovation will bring food to the hungry, opportunity and freedom, warmth and comfort to those in need.

If only we can find the best ideas, then we can solve problems, win customers and improve our world...

I don't disagree with the idea that innovation can solve our problems, but how did innovation start to be described in almost religious terms?

"Even if there existed an epiphany genie, granting big ideas to worthy innovators, they would still have piles of rather ordinary work to do to actualize those ideas. It is an achievement to find a great idea, but it is a greater one to successfully use it to improve the world."

Sit inside a coffee shop and you can hear any number of brilliant ideas. But unless those ideas are turned into something real, the ideas are worth less than the coffee.

The best ideas don't win. Good ideas that are used for actions, products and new behaviors can win...sometimes.

So why do we think that ideas are so valuable? Why do otherwise rational people believe that the best ideas will save their company, their country, their family?

First, in order to innovate, it is necessary to Observe reality as closely as you can to discover what is currently happening.

Second, the innovator gets to have fun with ideas - (s)he forms a Hypothesis of what might work better.

Third, that hypothesis needs to be tested in an Experiment prototype or pilot, where a small form of reality is compared to the hypothesis.

Fourth, measurements from the experiment are used to Evaluate the original hypothesis - did it do what was expected? Can that hypothesis be changed in order to affect the desired change?

Easy to understand, but quite often hard to do. And yet, innovation can become a little easier when faith in "the great idea" is put aside - and "good enough" ideas are put to the test of a scientific or innovative method.

It's time to ask better questions.

2009-03-17T07:52:00.011-05:00

An inherent obstacle to innovation is the context, culture, history and assumptions of a current process or business. Sometimes the harder someone works on a problem, the more elusive the solution becomes. Every once in a while, the person who has the most experience can solve a problem, but only if they don't respect their own experience. Some are able to question their own past success, but they are very rare people.

Quite often, there is a need for someone with less experience to look at a problem - someone who can see it for the first time, has little knowledge of the existing orthodoxies and can blithely question the most fundamental assumptions of success. Someone needs to bump the record player when the needle is stuck, but who can do that?

It can be helped by an external innovation expert - usually a consultant or coach who can look at the problem from the outside, bring in new insights from customers, or help guide internal teams through a process to see a problem and solution for the first time. They can ask questions for you.
Your competitors can do it for you. Usually, innovations are developed by new and unexpected competitors that have no respect for the past - they are able to ask, "Why are things done the way they are? Can't we do it differently and make it better?"
Your own employees can come up with innovations. But they usually need good questions to answer.

In order to understand better how organizations can improve innovation, let's look at each of these three methods.

1. Innovation Consultants

There are a great number of good consultants that can help organizations innovate - each with their own areas of focus and processes for stimulating innovation and commercialization of new ideas. It would be impossible to characterize them all at this point - but there is an interesting commonality: they all ask questions.

Whether consultants are questioning employees, competitors or customers, they are working to discover key aspects of the value chain, products, services and processes that can be fixed or changed in some way. Once the opportunity is identified, they are able to recommend solutions, test and refine them with customers, then commercialize.

The innovations themselves do not occur in a vacuum. Innovation consultants don't just come up with a good idea - they come up with questions that they either answer themselves or have answered by customers and employees.

How often does a public speaker give an average or sub-par presentation followed by a question and answer session where they become interesting or even dynamic?

It is an interesting phenomenon. No matter how little creativity or originality someone possesses or however ill-prepared they may be, when they are asked a good question, they can provide a good answer. This may be the result of an educational system that emphasizes answering questions, or it may be a more fundamental survival mechanism where human beings are hard-wired to solve immediate problems such as if there is no food, figure out how to get food.

However, if a problem is unclear, ill-defined, or not immediate - it becomes much more difficult to solve. That's why experienced speakers tend to prepare by developing un-spoken questions that they can then answer in their prepared remarks. They make the problem of: "give a good speech" more clear, defined and immediate by changing the problem to, "answer this question".

The same dynamic occurs when trying to prompt innovation. In a way, consultants are the motivational speakers of innovation. Isn't it curious that most innovation consultants are also persuasive presenters?

2. Competition

The very act of competing can force one to question the status quo, especially when the competitor is far from being the dominant player. The small competitor, in order to survive, must challenge reigning orthodoxies - otherwise they will be crushed by dominant players' resources.

No one could reasonably compete with Xerox's domination of big business copying - until Canon questioned the format, the price model, the sales channel - even the customer target and transformed the entire industry (becoming the number 1 seller of copiers in the process).

United and American Airlines defined what a commercial airline was - how to make money, how to operate their business, how to talk with their customers...until start-up Southwest Airlines questioned everything from ticketing procedures to boarding to meal service. Instead of asking themselves how to become the number 1 airline, they asked how they could get another round trip out of every airplane per day, how to better incent their employees for customer service, how to appeal to customers who rarely fly...and in the process they became the most profitable airline in the history of aviation.

The innovation advantage may very well go to the new entrant. It almost seems easier to challenge what one doesn't have in the first place. What do they have to lose? Unfortunately, small companies can lose everything if they are wrong. But if they succeed, they can often transform their industry. That's why many larger companies like GE, IBM, Microsoft and Google tend to acquire small companies and their innovative products once they have been proven successful. In effect, they've "outsourced" their innovation to smaller start ups.

As Xerox, United Airlines, General Motors and many others have discovered, however, it is somewhat risky to leave innovation to the competition.

3. Employee Innovation

When you ask a team of people the right question, it's amazing what they can come up with. An inspiring story about how teams can innovate comes from the experiences of Apollo 13. When flight director Gene Kranz needed to help the stranded astronauts build an improvised air filter, he assembled a group of engineers, presented the problem, made clear what the stakes were, presented all the items the astronauts had on board the capsule, then told them to come up with a solution. He asked a better question. He made the challenge specific.

When GE's jet engine unit asked customers about the repair of their jet engines and showed them how they were repairing those engines faster than ever - their customers told them something to the effect of, "I don't care how fast you repair the engines, I'm still not able to fly the plane until it gets back on the plane." The team of engineers at GE realized that they could probably deliver a faster turnaround if, instead of shipping the engine to the factory they brought the factory to the plane. By getting a specific challenge from their customers, they went from simply working faster to working smarter.

There are many innovation programs and initiatives going on inside organizations to encourage this kind of employee problem solving, but too often they don't deliver real innovation. They seem to ask too broad a question - something like, "how can we make our company number 1?" or "how can we reduce costs and increase revenues?", or even worse, "how can we become more innovative?" There seems to be too much of an emphasis on open brainstorming or collection of ideas and best practices. It is still possible to innovate without specific and immediate problems to solve, but it can be difficult at best. At worst, these kinds of programs either lead to small adjustments or to innovations that don't really matter to anyone beyond a very small interest group.

There is a better model to encourage innovation. Instead of asking for best practices, companies should learn to ask their employees specific questions - then reward anyone who answers them well. This process has been proven to yield incredible results.

In 1919, Raymond Orteig offered $25,000 to the first pilot who could fly non-stop between New York and Paris. There were no restrictions of how that pilot could develop his or her plane, how they flew it, or who financed them. A great number of entrepreneurs, pilots and engineers tried to answer this question. They used any number of strategies and designs, but ultimately, the innovation that helped create the $300 billion commercial aviation industry didn't come from a known organization or blue chip company. None of the airplane manufactures drove the innovation. Instead an unknown airmail pilot named Charles Lindbergh, experimenting with a simple plane design and powerful single engine, made the trip alone in 1927.

Recently, the X-Prize Foundation offered $10 million to whomever develops a production ready, reasonably priced car that gets the equivalent of 100 miles to the gallon and that can win a multi-day staged race across the country in the summer of 2010. A very specific, immediate question that will likely lead to the next blockbuster efficient car in the US. The industry has spent far more than $10 million trying to deliver this kind of innovation, but I won't be surprised if this investment will lead to a far greater breakthrough than GM or Chrysler could ever manage.

Beyond the X-Prize, there are a good number of organizations such as NASA, Google, Netflix and the Department of Defense who are asking questions and offering prizes to anyone who can answer them. They have found that asking a simple, direct and immediate question along with a financial incentive for whomever is willing and able to answer it, yields surprising innovation, productivity and speed to market all at a fraction of the cost of traditional R&D.

The impossible can become commonplace because someone asks the right question.

Therefore, a more effective innovation program inside companies would not ask for best practices or innovation ideas, it would ask simple questions and incent anyone and everyone to answer them.

No one wants to innovate - they have to.

2009-03-12T10:12:00.012-05:00

Why would anyone want to innovate?

Despite the excitement of finding something new, despite the potential success of a breakthrough concept, despite the honor history affords to innovators like Thomas Edison, Steve Wozniak, Orville and Wilbur Wright, Madame Curie, Galileo, Henry Ford and many others, innovation remains a high-risk, difficult and painful process. Innovators routinely face mistakes, dashed hopes, financial stress, and constant uncertainty. It’s hard, painful, unpredictable, and sometimes even embarrassing. Innovations that are ahead of their time have a tendency to fail. Innovations that are too late are usually eclipsed by others. Recent history is filled with expensive and publicly known failures such as the Apple Newton, the Sony Betamax, credit default swaps, the Bush doctrine and Crystal Pepsi. Most organizations have any number of failed new projects and initiatives that no one really wants to talk about.

Most people and organizations aren’t very good at innovation. It requires them to challenge everything they know to be true, and it quite often doesn’t work.

It’s far better to continue doing things the same way you did before. It’s far more rational to keep things going as long as you can. It’s far easier to keep selling the same stuff over and over again to customers and clients. Why innovate, when you can just gradually improve? Why innovate if you can get better at what you are doing now? Why innovate when it might cannibalize your existing products and services. Why innovate if you can apply proven formulas to solve problems?

A terrific way to avoid actual innovation is to create an innovation or best practices program. Most programs ask employees to submit their innovation ideas through some kind of application process. Ideas are then collected centrally - sometimes through sophisticated database applications, sometimes through varying versions of the old suggestion box. Once collected, they are judged by a panel of some kind, to determine which ideas are awarded recognition, prizes and ultimately implementation.

Wonderful ideas are usually acquired in this kind of program, and very quickly, employees will figure out what kinds of ideas are most likely to win recognition and prizes....ideas that help reduce costs always do well, as do ideas that can easily and quickly be implemented - usually referred to as "low-hanging fruit". Employees feel like they are part of an innovative culture, managers feel like they are innovating their company, and everyone is rewarded for good ideas.

Programs like this are easy-to-do, inexpensive and a lot of fun. Unfortunately, they don't actually innovate. They can incrementally improve existing models, but they can't really create new ones.

It's a paradox of innovation and human nature: Everyone wants to innovate and wants to create breakthroughs, but they rarely do. Our governments talk up the need to innovate and our politicians note that our country's success is built upon constant innovation. Our businesses constantly claim innovation as a differentiator and as a key to success. Individuals talk about reinventing themselves, becoming better people, losing weight, becoming more enlightened or quitting smoking. Everyone wants to innovate...but unless they have to innovate, there are too many reasons not to.

Innovation sometimes reminds me of dance. When anyone witnesses a great dancer such as Fred Astaire, Margo Fonteyn, Mikhail Baryshnikov, Martha Graham, or Cyd Charisse, it is likely that they want to dance as well. Who wouldn't want to tap accross the dance floor like Fred Astaire with Ginger Rogers on your arm? Who wouldn't want to glide through the air as elegantly and beautifully as Cyd Charisse? Everyone wants to dance - just like everyone wants to innovate.

Professional dancing, however, is an incredibly difficult profession. It takes years to learn how to perform most dances even adequately. Dancers endure brutal days of practice, constant exhaustion, little time for intellectual or social pursuits, permanently damaged feet and destructive diets all for the chance to make little money in a short career that is over before they reach 35 years of age.

Although everyone may want to dance, very few actually go through the difficulties and sacrifices in order to become a dancer. This was very well understood by the choreographer George Balanchine who said, "I don't want people who want to dance, I want people who have to dance."

Innovation, like dance, doesn’t happen because we want it to happen. It happens when we have to do it...when there is no other choice.

Innovative people and organizations tend to become innovative for one of three reasons:

1. They are unable to function, compete or thrive within the existing model - so they change the model to suit themselves.

Individual innovators find themselves inventing new products, new ideas and new ways of doing things because they are incapable of thriving with the old ways. Even if they wanted to conform, it might not be possible for them to do so. Most innovators find it very difficult if not impossible to follow directions – instead, they find it easier to innovate. How well for example, would Richard Branson do if he applied for a job at an established Fortune 50 company? Could Steve Jobs fit in well as a manager at IBM? How often do entrepreneurs continue to serve as a manager when they are acquired by another company?

I recently spoke with a colleague that consults companies on innovation projects, and he confessed to me, "It would be so much easier if I could just do things the way everyone expects. I would probably make more money, I would have more time off, and I wouldn't be so stressed out all the time...but I don't know how to do that. I have to innovate, there's no other choice for me."

2. They are new to a market, organization or game, and can't hope to compete with the existing leaders - so they change the rules of the game to favor themselves.

Xerox dominated the copying business for decades. Whenever a new competitor like IBM tried to gain a foothold in that market, Xerox always won. They were just too big, had too strong a relationship with their customers, and had too much of a head start. But then came a camera company called Canon. They didn't bother to play at the Xerox game of selling large photocopiers to large businesses - instead they came up with a small, less productive, less expensive copier that small businesses could buy and put on top of a desk.

In a few years, the small business market became the small and mid-sized business market - then large companies realized that they would do better with a larger number of small photocopiers vs. a few large Xerox copiers. Canon is now the giant in photocopying, and Xerox is playing catch up.

Canon's innovation changed the rules of the game so they could win. Without innovating, they couldn't even enter the market - so they had to do it.

3. The environment has changed so much that an individual or organization can't thrive anymore, so they change to adapt to a new reality.

This is where almost everyone finds themselves today. The economy has fundamentally changed, and only those who innovate will survive, much less thrive. The current downturn reflects two fundamental assumptions that everyone depended on and built their organizations upon whether they realized it or not.

In the 1990's and into the new century, business models assumed, conciously or not, that there was an unlimited and reliable supply of energy. With oil easily available and less than the cost of bottled water, everything from manufacturing to professional services could do more in a larger geographic footprint at a lower price than ever before. Now, without a consistent supply and price, it is difficult to make those business models work as well as they did only a few years ago. Without cheap and plentiful energy, we have to innovate alternatives.

Also in the 1990's, equity and debt financing became so easy to obtain and so inexpensive that companies could create much higher margins from almost any activity. Whether we realized it or not, much of our activities were based on different forms of leverage. Now that capital is difficult to source and ultimately more expensive, we have no choice, we have to innovate what we do and how we do it.

Innovation only happens when there is no other choice. With the changing of our economy, many more companies and individuals have to innovate for the first time. In the past, a few individuals and companies innovated to make things better for themselves, to allow themselves to win when they didn't have all the cards in their favor. Now, everyone is in a position where they must innovate if they wish to survive.

Why would anyone want to innovate? They don't.

But they must innovate if they want to succeed.

Don't just throw money at it - innovate it.

2009-03-02T14:40:00.006-06:00

One of the more exciting movies in 1978 was a film about Vietnam called "The Deer Hunter" directed by Michael Cimino. It won five Academy awards that year, including best picture and best director. Vincent Canby of the New York Times wrote:

"Michael Cimino's "The Deer Hunter" is a big, awkward, crazily ambitious, sometimes breathtaking motion picture that comes as close to being a popular epic as any movie about this country since "the Godfather."'

It seemed that this was the first time that a popular, mainstream Hollywood movie captured the national anguish of the Vietnam War in a way that many people could relate to and understand. Although Mr. Cimino had directed a successful film before, "Thunderbolt and Lightfoot", this was his first film that made everyone take notice. It was a breakthrough for American popular culture as well as for Mr. Cimino.

The film cost about $15 million to make and grossed over $50 million.

In 1980, Mr. Cimino's next film was released, Heaven's Gate. It was a breakthrough of another kind - one that almost destroyed his career as well as United Artists. Vincent Canby's review from the New York Times included the quote:

"...an unqualified disaster..."

The film cost about $40 million to make and grossed less than $3.5 million.

Although there are many reasons why one film was successful and the other was not, (most of which I am not qualified to comment on), there is something instructive here for innovation:

New projects may not always do well when too much money is thrown at them.

Although an investment is required - paradoxically, too much money can have a stifling effect. Innovation and problem solving on a movie set (or with a product or a company) is difficult and risky. When there is ample money involved, the tendency is not to risk it. One can always buy a solution if you have plenty of money to spare. Conversely, when money is scarce and resources hard to find, it is easier to take chances, to experiment and to innovate.

Interestingly, there is a footnote to "Heaven's Gate". Even though the initial release was not very successful, it spawned innovation anyway. Jerry Harvey of the Z Channel (a cable pay TV channel) released a revised "Director's Cut" of the film that was reasonably successful with their subscribers as well as on VHS and DVD releases. It may have been one of the first "Director's Cut" releases - and since then, "Director's Cut" VHS and DVD releases have enjoyed brisk sales for other notable films. "Heaven's Gate, the Director's Cut" was a video marketing innovation.

My guess is that Mr. Harvey felt there wasn't that much money at stake to try something new with a movie that wasn't successful. The risk was relatively low and the reward was high enough to make it worth while.

Innovation, whether it is in movies, in science, or in business, is a difficult, risky, dirty and often painful process. If a situation is too easy - it might not be worth the trouble to innovate. Most of the big innovations of the computer age seemed to have started in garages. Some of the best ideas inside companies come from those pilot projects that few people even know about. The most effective marketing can come from companies short on cash but long on need to reach out to new customers.

Here's a simple example that I came across recently that shows how a lack of money can encourage innovation:

Recently, my dentist of the last dozen years, (Dr. Shawn Post) handed me a stack of business cards. Business in the current recession is challenging, as many patients are putting off their regular visits in order to save money. He is the best dentist I have ever worked with and most of his other clients are as fiercely loyal as I am. Over the years, I have referred a number of friends and associates to his care.

Like most small medical practices, he has limited resources for marketing his services, and no sales force to help find new clients. Instead he decided to outsource his sales and marketing to his clients.

On the back of each business card is a $50 gift certificate. Any new client who brings the card in for a dental visit, will get $50 off. Plus, anyone who gives this card to that new client will also get $50 off. My dentist is paying his clients $50 for each new client they bring in!

The simplicity as well as the sophistication of this tactic is striking. It is measurable, it leverages the fierce loyalty of his clients, and it undoubtedly will lead to new business. All of this for the up-front cost of a box of business cards.

Of course, this kind of tactic wouldn't work for a successful Fortune 500 company...or would it?

Now that resources are tight and the need for new business more imperative than ever, all the right conditions are in place. No more throwing money at a problem - now it's time to innovate.

Time to Ignore the Competition

2009-02-17T20:27:00.004-06:00

One of the first questions businesses ask- especially when sales are down, when the markets are tough, when customers are lost - is, "what is the competition doing?" Many innovation projects start with researchers and consultants probing the market to understand what competitors are up to. Marketing is analyzed, products are investigated and former employees are often questioned - all in an effort to understand what the competition is up to, and what should be done to compete with them.

It's almost as if companies are trying to innovate by asking what was done in the past.

Unfortunately, this kind of research never leads to innovation. When the focus is on what a competitor is doing, one is condemned to follow what a competitor does. Even if one improves on something that a competitor is doing, only small increments of change are possible. Innovation that changes markets, creates new customers, and delivers high margins and profitability does not come from the competition.

Would Edison have created a business around electic lights and electric distribution if he had paid too much attention to the gas light competition? Could telegraphs have been developed by trying to innovate a better horse and rider? The personal computer was developed - not as a competing super computer to the mainframes - but as a completely new path, use and user for a smaller, cheaper, more flexible computer.

Instead of listening too much to competition, perhaps it's time to listen more to customers. Customers may not always know what they want, but they can tell you what bugs them, what they want to do with their lives, with their businesses, with their families. Customers can give you opportunities, challenges, and new ideas - but only if you are willing to listen to them.

And by listening, I don't mean researching them...that's what the competition is doing right now. Instead, try sitting down and talking with them. Throw out some ideas and see how they react. Ask them why they disagree with you. Try to find out what makes them laugh.

The competition always has the same old ideas. Customers have all sorts of new ones - if you sit down and talk with them.

If you want to innovate, try ignoring the competition for a little while.

Can you afford to innovate now?

2009-02-10T16:42:00.011-06:00

During difficult economic times, many ask, "can't innovation wait?" It seems a reasonable question - companies are facing catastrophic losses, reduction in demand for their products and services, and uncertainty in debt markets, legislation, and fuel prices. Why engage in the risky practice of innovation - or change what you are doing - when there is so much danger, uncertainty and change in the world around you?

Isn't it better just to hold on and wait for this storm to pass?

No.

Consider the following list of companies:

General Electric

Hewlett-Packard

Jim Henson Company (the Muppets)

What do they have in common?

When they began they all challenged the accepted business model of their time. They were all innovators.

They also all started during recessions.

General Electric created entire industries that didn't exist before - even though it started during the financial panic of 1873. Hewlett-Packard started during the great depression, but created technology that helped to win wars and build entire industries. During a recession in the late fifties, Jim Henson transformed puppetry and in the process created a massive global entertainment platform while Hyatt Hotels began to build a global portfolio of hotels. Microsoft and Apple were started during a time (the 1970's) when multiple recessions had convinced most experts that American business was no longer able to grow. Fortunately, those experts were wrong - in great part, thanks to the innovations of personal computers and the Internet.

How is that possible?

There are many reasons for a recession to happen, but whenever an economy is in one, the rules for success change dramatically. Capital becomes scarce, raw materials unreliable, customers reluctant to buy. What was easy before suddenly becomes more complicated. Products that everyone had to have at any price before, suddenly lose their value. But as long as there are still people living their lives, there are ways to create something they need, want and will pay for - it just might be a little different than it was before.

As an example, during the year-long recession in 2008, innovative on-line retailer Amazon had a 28% increase in net income. At the same time, retailers that did not innovate such as Circuit City are facing diminished market share, lost sales and even bankruptcy.

Companies that perceive and understand the new rules in a recession are able to innovate and thrive, while those that continue as they did before risk losing everything.

Most people's natural inclination is to continue doing what they did before - even when it doesn't work as well as it used to. Innovators change what they are doing, how they are doing it and even why they are doing it in order to succeed in a new environment.

Strangely then, the most dangerous strategy is to avoid innovation during a downturn.

It's times like these that the imperative for every company, every leader, every manager must be to challenge all assumptions based on a rising market. Every process, every service, every product must be looked at from a fresh perspective - and changed to fit the new reality of a down market.

In a recession, can you afford not to innovate?

Innovation is a subersive act

2009-01-29T09:28:00.008-06:00

Innovation often happens in companies despite their best efforts, not because of it.

The inherent problem of innovation is that it requires a low level of respect for orthodoxy, institutions, organizations and customs. In order to imagine, develop and sell something new, one has to assume that the old way is not necessarily the only or best way to do something. The threat innovation presents to the existing order of things is irrelevance, even extinction. Innovation gets around the rules of the road and quite often creates new rules. It subverts our understanding of what is possible. Innovation alters, manipulates and even destroys the present in order to create the future.

In 1633, when Galileo discovered that the Earth moved around the Sun - an observation that allowed for an entirely new understanding of the world, the Catholic church did everything they could to squash that innovation, and declared in their statement, "...the proposition that the sun is the center of the world and does not move from its place is absurd and...heretical, because it is expressly contrary to the Holy Scripture." Galileo was denounced and imprisoned, while the incredibly successful Catholic Church took more than three centuries to adapt their outlook to a new reality.

The Catholic Church rejected this new idea - not because they wished to avoid progress, but because innovation potentially threatened their position as an organization that understood the true nature of the world. If they accepted this new view of the heavens, they would have to abandon their own orthodoxy, possibly undermining their own position as the dispenser of truths and possibly encourage their constituents to leave the church. This innovation was perceived to threaten their survival. Interestingly, the church's reluctance to accept changes in science, custom and culture, though at times a strength, has also allowed other philosophies and religious institutions to rise and flourish in their stead.

It's logical that a successful organization will likely resist or reject innovation that challenges their success. IBM resisted PC's as long as they could - and even undermined their own PC division. Microsoft resisted the Internet, social networking and open source programming as long as they possibly could- for each one of these innovations threatens the success of their existing business. The auto industry still resists innovations that challenge the internal combustion engine. Aristocracies have resisted democratic governance for thousands of years. The list of successful organizations that have rejected, squashed or resisted innovation is endless.

And in almost every case, the reigning orthodoxy states with absolute certainty, "this innovation is impossible." Man will never fly. It is impossible to go to the moon. No one will ever want a personal computer. Cars will never be inexpensive enough for everyone to own. It's impossible for France and England to be allies. An African American can never be elected president of the United States.

So why would a company want to foster innovation? They don't. Almost all companies talk about the need for innovation, and spend time, money and resources instituting innovation projects and programs. They may even boast about their innovations, R&D spending, patents and new products...but underneath their official story, they don't really want to innovate. Even while discussing the importance and ideals of innovation, successful companies are uncounciously incented to keep innovation from happening.

Put in another way - if a company is successful, has a strong market share, is able to provide executives with fat paychecks, workers with reliable salaries, and investors with reliable returns, why on earth would they want to jeopardize success with a completely new way of doing something. Doesn't it make more sense to gradually improve what they have instead of changing it?

This strategy of avoiding any real innovation seems reasonable. It seems like a way to avoid unnecessary risk. It seems like the right thing to do. If we allowed unfettered innovation, how on earth would companies survive?

And yet, how can a company survive unless they can adapt to change, find new opportunities, and define the future for customers and investors? Companies must innovate, not because it is easy, inexpensive, comfortable or risk free; but because without it, they will ultimately fail. Without innovation, one has to accept that the world is flat, that the United States of America cannot exist, that slaves are necessary for an economy to thrive, that only priests can read text or interpret reality, that illness cannot be cured, or that children cannot do better than their parents. If orthodoxies and assumptions are never challenged by an organization - another organization that is willing to do so will ultimately take their place.

Central to the task of innovating inside an established organization is to become comfortable with the notion of subverting oneself. Organizations that can balance the need for continuity, certainty and harmony with the need for disruption, uncertainty and the dissonance of innovation are more likely to last longer, to reinvent themselves and thrive in good times and bad.

Innovation is subversive and dangerous - but it's also essential. It is important that innovation programs are taken seriously, are given appropriate room to succeed or fail, and are listened to and acted upon even if the results threaten current orthodoxies.

Does innovation work when it's too innovative?

2009-01-16T10:18:00.014-06:00

Innovation is needed now more than ever and companies, governments and organizations are trying to figure out how to become more innovative, and more successful at innovating.

But can the new thrive without the old?

Once the first adopters of an innovation have latched on to something, can the rest of the world catch on without some form of help? Or as Geoffrey Moore in his excellent book, Crossing the Chasm might ask, "How can we move from Early Adopters of an innovation to the Early Majority?"

There's an interesting paradox here: most marketers would agree that something completely new is a difficult sell...even though we are all in the business of selling something new.

In other words, innovation needs to be new, without being new.

Do we need a bridge from the old way of doing things to a new way of doing things? If so, what is that bridge and how do we build it?

Let's look at one area of innovation growth: the Internet innovation attracting the most attention these days is the explosive growth of social media networking tools such as Facebook, LinkedIn, MySpace, YouTube, Helium, del.icio.us, Craigslist and Wikipedia...new Internet environments that allow people to connect and collaborate in ways never thought possible before. The book of the moment by Charlene Li and Josh Bernoff describes all these social technologies as a Groundswell. This stuff is so ubiquitous, so easy-to-use and so inexpensive that more people are engaging with it at an exponential pace every day. It has become so mainstream, that many people credit these networking tools for changing the very nature of the US political process.

But there's one more potential reason for why these innovative ideas have become mainstream so quickly. They don't really seem that new.

Each of these tools are in some way based upon systems that already exist, that people are already comfortable with, that are entirely familiar. Address books, bulletin boards, diaries, episodic storytelling and networking have been a part of everyone's life for generations. None of these innovations have asked users to change what they are doing - rather augmenting what they already do. And most users do not exclusively use these tools without combining them with some for of actual connection in the real world. A business person may keep their address book in LinkedIn, but they still call someone up to get to know them better, or share a cup of coffee with them between Twitter posts.

Another example comes from the beginning of the World Wide Web in the 1990's, when everyone extolled the power of virtual businesses. Someday,

everyone assumed, there would be no more "bricks and mortar" stores - everything would be virtual. Perhaps - but it hasn't happened yet. Instead, there has

been a gradual redefinition of retail to a hybrid that combines both the Internet and actual visits to stores. Old style retailers ranging from J.Crew to Sears, to Barnes & Noble and Best Buy discovered the power of the Internet to expand sales and communicate directly to their customers. Customers of the stores became customers on the Internet, because they found everything to be just like going to a store - even a "shopping cart" was provided.

And why am I typing this blog post with a QWERTY keyboard...

designed to help slow down a typist's speed so that a mechanical typewriter wouldn't jam quite so often?

The hybrid of old and new provides a bridge for innovation. Innovation needs to be old as well as new, familiar as well as novel if it is to be adopted.

How does this work...really?

2009-01-08T12:14:00.009-06:00

There's always at least two versions of how a relationship or process works. There is the official version; what we learn in school, hear in a political speech, put on brochures or report to investors. And then there is the real version - the version usually prefaced by, "this is how things really work."

In order to change or improve something, understanding "how things really work" should be essential. And yet, innovation efforts quite often start without anyone challenging the official version of the truth. An obvious example right now would be the US auto industry, where innovators wasted much of their time, resources and labor improving something that may not have been that important to customers...at least not important enough to pay for it when it became expensive.

In the 1990's and early 2000's, US car buyers could purchase cars with more and more power. The conventional thinking was that since consumers enjoyed powerful cars and since they continued to buy them, they must really want more powerful cars. The logical extension of this "official version" of the market was that larger, more powerful cars would always command a greater market share and price premiums. Innovation resources at GM, Chrysler and Ford focused on delivering more power every year - and they delivered admirably. Sales continued to do very well throughout that period as the roads clogged up with SUV's, muscle cars, and ever larger pick up trucks.

But...no matter how big their trucks became, the American car companies continued to lose market share to companies like Toyota and Honda...even when American cars cost less money...

Meanwhile, non-US manufactures continued to improve the efficiency of their cars. A few attempts at producing large non-US cars (usually manufactured in the US) were relatively successful, but they never stopped making efficient small cars. And every year, their market share increased. Every year, even though the conventional thinking was that US car buyers preferred to buy large and powerful engines - companies with smaller engines sold more.

Was "the way things really work" different than we thought?

After a protracted war and conflict in oil producing countries, increased awareness of environmental threats and an unprecedented volatility in gas prices, American cars and trucks stopped selling. And Toyota kept growing.

But how could that be? Americans love their muscle cars and trucks, don't they? At least, that's the official version of the truth.

The un-official version? Perhaps most Americans - like everyone else in the world - don't put that much priority on horse power. Something else probably drives their purchasing behavior - and it just looks like they are addicted to muscle. Otherwise, if horse power were truly a dominant reason to buy a car, buyers would make whatever sacrifices necessary to keep buying it - even as oil prices fluctuate and global warming becomes an accepted context.

This was an easy trap, and almost everyone has at some time or another fallen into it. The official version of the truth - although useful for continuing the existing order of things - is very deceptive when it comes to innovation or preparing for future change.

Good innovators rarely believe the official truth. To innovate almost requires one to be skeptical - even subversive - when considering the established order of things. That's why, when considering innovation, it can help to use a single word, "Really".

The next time you are asked to improve something, make sure you are ready to ask, "really?" early and often.

A proposed "Really" method for innovation preparation

Step One - determine how it works now...really...when a customer buys, uses, displays and disposes of your product/service/process, ask "why?" Start with the official version of reality, then ask the question, "Is that REALLY what happens?". Probe, ask questions, determine what the actual motivations, actions and functions are - not the perceived value - the real value.

Step Two - determine what isn't working...really... where is the pain, what stinks about a product, service or process? Where do people feel most frustrated? How do they work around what stinks? How are they overcoming your lousy output? What are the band-aides? What is the alternative?

Step Three - What do we want...really... start with an official version of what people want - then ask "really?" Is that what we really want? Is there something else that would be even better? What do we really hope to accomplish? What does that look like?

When you understand what really happens, what really isn't working, and what people really want, you may have a foundation for meaningful innovation.

Really.

Does innovation count if no one pays for it?

2008-12-16T23:02:00.009-06:00

I've always liked the old existential riddle regarding a tree falling in the forest that no-one hears. Did it really happen? A more pragmatic or appropriate question might be, "Does it matter?"

If an innovation doesn't sell, it doesn't gain a higher price, a higher margin, or a greater share of market - I not only have to ask if it matters, I wonder if it can be called real or meaningful innovation...is it really innovation if no one values it enough to pay for it?

Innovation for the sake of exploration may very well be an important part of how we extend knowledge, understand the meaning of life, or someday discover cold fusion, but in the context of business, this question becomes simple to answer. If no one is willing to pay for it - as far as business is concerned, it shouldn't matter.

This was illustrated quite graphically to me recently. Amidst the imminent collapse of the U.S. auto industry, there has been quite a bit of criticism about a lack of innovative over the last few decades. No one outside of GM and Chrysler is surprised to find that at the end of 2008, they are unable to operate without significant help from the US government - as fewer car buyers are willing to purchase their products every year.

I recently met a very smart person who has"big 3" auto companies as clients and asked him why he thought US car companies have stopped innovating. His answer astonished me.

"US car companies have been delivering innovations at a terrific pace for more than ten years."

He wanted to talk about restructuring and the deals being made in Washington DC, but before he went deeper into the details of labor issues and unfunded pensions - I had to press him further on what those innovations are.

"Just look at the Hemi engine," he said, "the GT, the Cadillac, even the Hummer...these represent amazing technical advances that no one else can match...the amount of horsepower they are now putting under the hood is astonishing."

He was right. When you look around at modern American cars, the amount of pure power is astonishing. The last time I drove a rental car, I was thrilled to pull out from a toll booth at a nearly criminal velocity. It is amazing how much horsepower you get with an American car. The engineers in Detroit have innovated many aspects of what's under the hood - and every year people have been able to accelerate just a little bit faster.

But...

I have one question...with most driving done in cities, and most city speed limits between 30 and 50 MPH, is shortening the time spent going from 0 to 60 MPH the most valuable thing to innovate? I love being thrown back in my seat when I step on the gas - but is that worth $30,000 to me? Are there other innovations that might create a new market, attract more customers and grow margins?

In other words, has Detroit been innovating the wrong things all this time?

While Detroit increased their engine power, companies elsewhere used innovation to create significant new business- Toyota produced a small hybrid car (with anemic acceleration, I might add) that has waiting lists of buyers willing to pay over $30,000 for essentially a small and slow car. Zip Cars experienced explosive growth in major cities by challenging the concept of ownership - offering a new kind of hourly rental And there are several other promising innovations surfacing, including Better Place in Israel that is changing the entire model for fueling cars by offering swappable batteries for electric cars that consumers pay for by the mile - instead of by the gallon.

Other companies are trying to solve car user problems such as environmental impact, fuel costs, total price of ownership and convenience.

Detroit is improving acceleration.

I don't want to denigrate the astonishing engineering accomplishment of a Hemi engine. I do, however, question it's value in a world of drivers spending hours a day in rush hour traffic moving at 20MPH. It seems that auto buyers throughout the world are asking the same questions - and are waiting for more meaningful innovations - innovations they are willing to buy even if it costs more.

I'm surprised at how easily innovation teams can overlook this fundamental idea.

And so when I work with my clients in other industries, the lesson of Detroit sugessts a useful - and perhaps somewhat obvious - rule for everyone to use when evaluating what innovations to persue:

Innovation doesn't count unless someone wants to pay for it.

Is it Marketing or is it Nagging?

2008-12-04T13:32:00.006-06:00

Communication is a central part of managing companies, of persuading markets or of leading governments. However, when people talk about communication, they often seem to be missing out on what the word actually means.

Inside organizations, when an individual or small group comes up with an idea, innovation, or plan of action, they hone it, make sure that they have worked out how best to make it work, how best to implement. Then, when the plans are all in place, they decide to "communicate" it to whomever has to live with the new idea.

Most professionals have spent time with change management and six sigma consultants. Well-trained employees talk about gaining "buy-in" for an idea - of communicating with key people and getting them to support the idea. In marketing departments, a value proposition is carefully constructed and then a series of communication strategies are used to communicate that value proposition to the target market. In politics, the message masters hone their talking points, then repeat them until the voters can recite them verbatim. Professionals are using a communications formula.

But the formula rarely works as well as it should. People hear the messages, but they don't always believe it. Audiences lose interest. Markets enjoy the commercials but don't buy the products. Voters focus more on a sigh than on a platform position. Why is that?

Perhaps there's more to communication than the current formula? Perhaps our assumptions about communication are flawed?

A central assumption is that communication is a one-way activity. The communicator talks and the audience receives the message. But look at the word "communication" itself. The first half of the word is "commun" - a root for "community" and "commune". Does this suggest that communicating is a group activity? And if it is, why do our formulas for communicating tend to only work in one direction: I talk and you listen?

As a test of that assumption, imagine your own family communications. Can a wife effectively persuade a husband telling him to put away his shoes over and over again? Can a father persuade a teen-age son to avoid smoking with a series of bullet points? Perhaps...but family counselors and other experts seem to suggest that a more effective (and more enjoyable) approach maybe to enter into a real conversation with family members, find out why they are doing what they are doing, make clear that you understand and value their point of view, discuss together how it might be possible to change - and maybe even come to a decision together that neither one thought of before.

Another way to look at it is - when you commune, you are learning. Communicating requires that you learn from the people you communicate to - what they need, what they want, what they know, how they might help solve a problem, how they can help you to do better. Too often, the assumption is that the speaker knows something and therfore needs to place that knowledge with the listener.

And why then, even though nagging family members doesn't work so well, do we insist on nagging our customers, colleagues and constituents? Why do we hire advertising and PR firms to nag the markets with greater skill and polish than we could manage? Why are we nagging?Instead of working on becoming more and more accomplished nags, perhaps we should change our assumptions and stop nagging altogether.

What would a company look like if it changed the communication assumption in order to listen and learn from the people?

A few months ago in the New York Times, I saw a company that has begun to find out. (http://www.nytimes.com/2008/03/01/business/01nocera.html?pagewanted=1) Mickey Drexler, the current CEO of the retailer J.Crew, has managed quite a turnaround for the company. As described by the NYT, key to his process is a constant and in-depth conversation with his customers and his employees.
"Visiting stores, quizzing the staff, critiquing everything in sight — and most of all, meeting customers — is at the core of how Mr. Drexler runs J. Crew. It’s also what makes him happiest. "
Mr. Drexler is known throughout the J.Crew chain for showing up in a store and talking with customers and salespeople and finding out what they like, what they don't like, what works and what doesn't. He delights in trying to persuade someone to put on a new outfit and tell him what they think of it. Instead of telling customers what they should buy, he asks customers what he should offer.

Mr. Drexler has found a way to market to his customers by constantly learning from them. He communicates the company's mission, values and strategy by listening to associates and customers - by "communing" with them.

How can other companies stop nagging their customers and commune like Mr. Drexler?

What is marketing...really?

2008-11-25T23:28:00.008-06:00

I'm often perplexed by how most people seem to define the word "marketing". Ask what a marketer does, and usually advertising comes to mind. Marketers are seen as characters in an old movie starring Tony Randall looking for the commercial gimmick that will sell the latest product.

Even those who call themselves marketers have a Madison Avenue vision in their minds, and even if they are talking about the latest Internet based, new media, social media, branding or viral market gimmick, they are likely still thinking about some form of advertising.

And therefore Marketing is advertising...or is it?

Did Google advertise in order to become the giant they are today? If I remember correctly, Yahoo had amazing advertising campaigns, while Google had none. Was it advertising that created the frenzy for iPods and iPhones? They had some good advertising, but perhaps there was something about the products themselves? Was it advertising that made millions of Americans thrilled to spend more than $3.oo for a cup of coffee at Starbucks? I can't remember a single commercial for Starbucks but I do remember seeing everyone carrying around those cups. Was it a commercial that created waiting lists for the Toyota Prius? Or perhaps a car company actually delivered the first meaningful innovation in forty years and everyone started to notice.

In countless cases, people are persuaded to value and ultimately to buy an idea, a product or a service because companies marketed. Advertising helped get the word out, but without something special to back up their claims, little could happen...even when they put commercials on the Internet.

So if advertising alone doesn't make a difference, what does?

An interview with computer hacker Virgil Griffith printed in the New York Times last week ("Internet Man of Mystery" by Virginia Heffernan, 11.23.08) put it surprisingly well, "You step back and look at the entire interacting, breathing system and pick out the counterintuitive, unbalanced, seldom-explored parts and look for a way for these parts to interact such that they play off each other, synergistically amplifying their power to influence everything else..." Reading this, I was able to recognize a true marketer in Mr. Griffith, even if he was talking about hacking computer systems.

Marketing is a way to look at a market, understand the system of buyers, sellers, suppliers and clients - what makes it all tick, what is really happening underneath the lies we all tell ourselves, the slogans, the official descriptions and the talking points. When a marketer understands how the system actually works and why - then they can change it.

They may change it with a new product or service, a new way to approach the market, a new way to make something or a new use for something. But when a company is marketing, they are essentially innovating a new relationship with the market or redefining what the market means and how it works.

That's why I believe that marketing at its core is actually Innovation.

...and advertising? It can be a lot of fun. It can capture someone's attention. It gets the word out. It gives people permission to enjoy or be proud of buying your product. But without meaningful innovation (marketing), how much is it really worth?

Advertising and all other forms of communication are powerful and important tools, but they in themselves do not market a firm, any more than a hammer and nails build a house. Skillful carpentry skills alone cannot make a brilliant building - it's the vision of what could be - of how to make something better, of how to manipulate the existing system, materials and tools to create a new and more exciting world - it's innovation.

iPod innovated how people can interact with their music, movies and even their telephones. Zune innovated nothing but spent some real dollars on advertising. Ronald Reagan and Barack Obama's presidential campaigns innovated how the US could be governed and what the US could be in the future while their competitors merely communicated. Actually, those two presidential campaigns are interesting cases. Both presidents were brilliantly successful communicators - but they were not communicators alone...the skillful communications and advertising was put to use by their innovative visions for where the country should go.

Their unsuccessful opponents weren't bad communicators. Jimmy Carter and John McCain both had skillful and experienced communications teams, they both were proven communicators who could influence people with their powerful rhetoric and they spent millions of dollars on advertising. But they didn't have innovation and vision driving their words. They weren't seeking an improvement to the systems, rather they were trying to make what exists a little better.

If you aren't innovating, I wonder if you are really marketing.

A Few New Rules for Persuasion

2008-10-19T15:08:00.007-05:00

Sales, marketing, leadership...all require that we get someone to do something they don't want to do - to change what their doing - to transform some aspect of their work or their life. There are a plethora of books, management training and consultant practices designed to help you manage, or lead change - and yet most people and organizations aren't very good at it.

Soren Kierkegaard once wrote, "...in order to save men's souls, one must first seduce them." Perhaps we need to improve our ability to "seduce" or "persuade" others?

But we have entire disciplines and industries dedicated to persuasion. Marketing is supposed to work magic - to persuade the masses to buy something they don't want. But how is it that companies can spend millions of dollars on award-winning advertising, but not sell more products? US auto manufactures are spending more on advertising today than they did when they had a commanding market share. The best ads from the best advertising firms only seem to work some of the time, even though advertisers are well trained, are following all the rules of good advertising, and have produced some of the best design, drama, music and humour in our culture today. Insurance ads can make me cry pretty reliably, but I still won't buy their annuities.

Why do public speakers, when they follow all the rules given to them in public speaking courses, still bore their audiences? It's difficult to stay awake when a speaker actually follows the template that we all had to learn in our high school and college public speaking courses.

How can a salesman, trained in the art of closing a sale, still be ineffective? When I was a salesman, I remember a sales manager giving up on explaining how to close in any scientific way. Most of the time he attributed it to "magic" when someone pulled it off.

The best professionals all follow the rules that they were given for persuading others...but so few pull it off. Could it be that they are following the wrong rules?

I think so.

Allow me here to map out a few rules that I have discovered that are very useful for "seducing men's souls". This is by no means comprehensive...and I find myself discoving new "rules" all the time - whether from my clients or from observation.

These rules can help a clumsy speaker persuade more effectively than a slick, polished orator. These rules can help a company create a powerful brand identity and grow sales without spending millions of dollars on advertising. And most important, these rules can help a leader persuade people to follow, to change, to transform - even if the leader doesn’t look or sound like a charismatic leader.

Seven New Rules of Persuasion

Be what you are.
Pretending you’re something that you are not is not only dishonest; it undermines your ability to persuade. A speaker with a poor vocabulary that tries to impress with “big words” will appear less intelligent. A speaker that says, “I’m not that bright, but here’s what I know,” creates credibility. A company that promotes itself with impossibly grand or superlative statements can seem disingenuous, while a direct, honest, and simple statement can become far more inspirational – if it’s real.

But it’s difficult to communicate what you are if you don’t know what that is. Much of my time as a consultant is spent helping companies and individuals understand their strengths, weaknesses and differentiators. Understand - then be what you are.

Persuade authentically.
Tell the truth
One should be honest, not only because it’s the right thing to do, but because it is more persuasive. Few believe a person who only talks about how great they are; everyone believes someone who can communicate their own limitations.

And the limitations can usually demonstrate an attractive strength. For example, “Our airline only serves peanuts, but the flight will be inexpensive.”

Persuade honestly.
Differentiation Means Different
It’s generally understood that differentiation helps clarify value; that customers need to know how you, your product or vision is different and perhaps better than the alternatives. In practice, however, most communicate how similar they are to others. This often happens when a company or person doesn’t understand what makes them different, or when say what they think their audience wants to hear. That’s why, just as in rule #1, it’s essential to understand who you are and what makes you different.

Differences are persuasive because they stand out, because they draw attention, because when making a choice between similar options, only the differences are important.

Persuade differently.
One Thing
A speech, an advertisement, a sales pitch – should always be about One Thing, because that is all your potential listener can act on or remember at any one time. Multiple themes diffuse the communication and its effect.

The temptation “to educate” or to communicate every detail of a subject must be avoided at all costs. Instead, select the most persuasive thesis, and then support that thesis with three of the most persuasive facts.

Persuade single-mindedly.
“The good, if brief, twice good; the bad, if little, less bad.”
The above rule was actually formulated by the seventeenth century Jesuit priest and philosopher, Baltasar Gracian. It speaks for itself.

Persuade briefly.
Lather, Rinse, Repeat…as Needed
This rule was lifted from the back of a shampoo bottle, but also applies to persuasion. The greater a change one asks people to make, the more often they will have to be exposed to and reflect upon the persuasive argument. But don’t just say the same thing over and over again. If someone hears an idea from multiple perspectives, in different contexts, and at different times, they are more likely to take that idea on as their own.

Persuade repeatedly.
Give credit away
The most persuasive idea is the one we come up with ourselves. If that is the case, the most effective persuader will work to make everyone believe it is their own idea. Holding on to credit for a great idea is not as important as getting people to do what you want them to do.

Persuade humbly.

"Winning Ugly" Marketing Strategy

2008-09-10T15:49:00.006-05:00

One of my home town baseball teams, the Chicago White Sox, was described during the 1983 season by Doug Rader, manager of the Texas Rangers, as "Winning Ugly". He was trying to dismiss the White Sox style of play which emphasized a kind of scrappiness and bull headed determination rather than consistently good hitting or pitching.

Although I am not, strictly speaking, a White Sox fan, (I live on the north side of the city) I have always appreciated the way this phrase, "winning ugly", evokes an approach to challenges that can undermine a competitive field. When you are out-classed, out-gunned, and without a legitimate chance of beating the competition - there may still be a way to win.

Too often, whether in baseball or in business, the habitual winners forget what the game is about. In baseball, players may think it's all about their personal averages, their titles, their style, or their endorsement deals. A team that is thinking that way can be undermined by a team that understands that there is only one score that matters at the end of the game - who has the most runs...even if the winner got those runs in a clumsy manner.

Habitual winners in business can start to believe that the reasons they win have more to do with the coolness of their brand, their brilliant packaging, the elegance of their sales pitch, their advertising or how many magazine covers their CEO appears on. Companies that think like that can be undermined by a competitor who understands that the winner is whomever sells the most stuff at the highest price and the lowest cost. It doesn't matter how elegant your annual report is, whether you have the best sales materials, or how well designed your logo is. Those are all great things to have, and depending on what the target customers respond to, they may even help you sell more stuff at a higher price...but it is also possible for companies to "win ugly" as well.

The "winning ugly" strategy is based on a kind of honesty - both about the game being played, and about the player. " I may not have the best marketing but...", can actually build credibility for a company.

Two assumptions are at play in any selling opportunity. The seller assumes that the most attractive pitch will win the day, while the buyer assumes that everyone will exaggerate their claims to win them over. Strangely, instead of addressing a buyer's inherent skepticism by providing credibility, most sellers will continue to reinforce that skepticism with great marketing materials. But marketing that inflates your image can also diminish your credibility.

And credibility is everything to the buyer. Are you as good as your marketing? Can one trust a product, service or idea to deliver as much as it seems?

A client I worked with specialized in business process outsourcing for commercial lending. They had an outstanding shop of accounting and data processors who had, through Six Sigma methodology, computer systems and just plain bull-headed determinism, managed to drive more costs out of the process of servicing loans than anyone else in their industry.

They had terrible marketing materials. Every once in a while, they thought about updating their brochures and web site to make it look more stylish, more like their competitors, more elegant. But their CEO intuitively understood: not only did they not have the budget to create a beautiful web site and high concept brochures to look as good as their competitors - but the very fact that their marketing was "ugly" demonstrated to prospects and clients their core value as an outsourcer. Anti-slickness was their sales differentiator.

Marketing isn't just about incredible creative, strong messages, or the right image. Sometimes a marketing strategist should consider "winning ugly".

How to "hack" marketing

2008-09-02T21:54:00.008-05:00

There's something interesting about IT and computer culture that most people in Marketing haven't picked up on...something that may very well hold the key to persuasion strategies, and ultimately to selling a product or service: Hacking.

Good IT developers take as a given that there are two steps to getting what they want.

Step one: figure out how a system actually works.

Step two: figure out how to use that system to make it do what you want it to do.

Those two steps seem rather obvious, until you realize that great IT developers are most often"hackers" in disguise. That is, they instinctively look for weaknesses, loop holes or structures that allow them to "game the system". When a developer learns how a system works, they are less interested in the appearance of an application, but rather the gears, principals, and underlying code that make it work in the first place.

In the old days, hackers were seen at best as anti-social - at worst as criminals. But now, the richest and most powerful men and women in the world are hackers. Bill Gates is, perhaps, one of the richest and most well known, but hackers are running everything from our financial system, world-wide logistics and shipping, media and military security, to on-line retail to phone systems.

And hackers aren't just working computers. Hedge funds made a lot of money by hacking financial systems to come up with new financial structures. Southwest Airlines hacked the commercial airline business by understanding what was really driving costs as well as customers - then using it to their advantage. The best real estate developers hack neighborhoods to find value in a parcel of land that no one else sees.

Unbeknownst to most people, every discipline and every industry has "hackers" - and almost always, they are the ones running things.

However, it's usually not too difficult to spot a hacker if you can watch them solve a problem. Most people when solving a problem will start by asking, "What did we do before?" a hacker will ask, "How does this system really work?", followed by, "What do we want to get away with?" Once a hacker understands how a system works, then they can use or manipulate the systems rules to solve their problem.

Let me illustrate with a classic marketing hack:

One of the oldest rules of advertising has been Repetition. The more you repeat something, the more likely people will believe what you say and act upon it. That's why we see the same ads over and over again - why the same words, the same images and the same benefits are shown repeatedly.

Here's how it works: As a survival mechanism, people forget far more than they remember. Part of how we survive is by constantly editing what is important information and what is not. If we weren't able to do that, we wouldn't be able to discern between information that leads to survival - such as where the good food is or how to avoid the hungry lion and information that we don't need, such as how a grey pebble at your feet looks just like the grey pebble that you stepped on two seconds ago.

However, if you keep seeing that grey pebble over an over again, especially if that grey pebble is fundamentally different from the white pebbles you usually see, you will pay attention to it - and you may remember it as important.

By repeating, "grey pebble" over and over again, the brain starts to register "grey pebble" - and if enough significance is created, it will be rememberd - and even cause someone to act upon it.

A blunt tool that most marketers use is:

Say the same thing, the same way, over and over again until people get it.

Sometimes this can work - but sometimes it can mostly annoy people. Rarely does it actually build a brand (see my last posting).

A sophisticated hack - one that takes into account how the brain actually works - is to talk about the same thing, in different ways, from different people/sources, at different times until people conclude that it is important.

In order for a repetition to really mean something, there are a couple of things that should be in place:

It has to be different. If your grey pebble looks like all the other grey pebbles I'm walking on, and nothing of interest happens whenever I step on one, there is no reason for me to remember one over the other.
Information needs to come from multiple sources in a credible way. In other words, if one person keeps babbling on about grey pebbles, it can only rise to a certain level of importance. It may even drop in significance - as one wonders why this person is so obsessed about grey pebbles. If several people you meet during your day talk about the grey pebble, if there is debate about the significants of grey pebbles, if there are even disagreements about what it means - then it must be important and true. It's more credible if it isn't "sold" to you. It's more important and more believable if you engage in a "dialogue" about it.

Instead of following a formula, instead of looking at how something was done before, instead of just marketing, one may want to consider hacking the market - and in the process begin the "dialogue".

Are we confusing "Branding" with brand?

2008-08-15T10:49:00.003-05:00

Over the last 100 years or so, a kind of religious faith has emerged in business: the cult of Branding. Adherents to this faith believe that a brilliant logo, a compelling slogan and just the right name will build growth, margin and customer loyalty.

But does the "Branding" create a brand? Or is it the company and its customers?

Do slogans and advertisements persuade a market - or do they confirm what the market already knows?

The Priests of the "Branding" faith, (also known as brand consultants, advertising execs. and Chief Marketing Officers) will frequently point to successful companies that posses powerful brands that are valued or even loved by millions of people all over the world. The "priests" will then promise that if you follow them - if you change the look and feel of your name and logo, if you use a certain color, or a certain design template, a slogan, a communications framework or a set of talking points - then you too can have a powerful brand.

And so, the faithful go to these priests of branding - they give them dollars and time, they allow the priests to prod and poke their employees and customers - and then they change their signs, their slogans, their bullet points, brochures, advertisements and business cards.

And then, the priests declare the greatness of the new branding, and this is confirmed by the focus group testimonials, and perhaps even by awards from other priests.

But...with all this great new branding...for all this change...what does a company actually gain?

sometimes the share price climbs a bit, for many investors adhere to the branding faith...but that bump in price will diminish as soon as expectations are not matched by results.
sometimes employees with branding faith will swell with pride at their new and improved logo...but that will diminish over time, and as the realities of their work set in.
sometimes a customer or two, curious about all the new words and pictures, will inquire...but unless there's something substantive to back up the changes in words, the customers will lose interest.

So...does "Branding" provide the magic of a powerful brand?

Or...is there another way besides "Branding" to create that magic?

I suspect that modern business has become confused by "Branding" and has missed what a brand actually is, why it is important, and how a company goes about getting one in the first place. The high priests of "Branding" may be right that brand is good - but they might not be really helping companies get there.

Are we confusing "Branding" with brand?