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Innovate strongly but narrowly

September 11, 2006

UPDATE: The full interview can be read here for a limited time.

The Wall Street Journal includes a special report on technology today, which features a fairly lengthy interview with me on "how to be a smart innovator" (requires subscription). I question the popular notion that "companies should be innovating everywhere," arguing instead that companies should narrow their sights when it comes to innovation: "You need to bring the same kind of discipline to deciding where you innovate as you'd bring to any other kind of management question. You want to make sure that you innovate in those few areas where innovation can really pay off and create a competitive advantage and not innovate in other areas where it won't pay off." One of the dangers of placing too much emphasis on innovation, I suggest, is that a company can end up devaluing the work of the "merely competent." In fact, having highly competent employees is usually every bit as important to a business's success as having highly creative ones.

Comments

"Make no little plans: they have no magic to stir men's blood."
- Daniel Burnham

Posted by: Jason Kolb at September 11, 2006 09:40 AM

Not sure it's as black and white and depends on how you define innovation. Innovation is typically not the "breakthrough" idea like Steve Jobs with the Ipod and Dubinsky with the Palm handheld. It's more like Michael Dell who created his business model after seeing no one in the industry make money in the PC industry. Innovation is typically building on the ideas of others (The original mouse was debuted in the 60's but it took Apple and the market to value its simplicity in the 80s. Interestingly enough the original version was through to be too low featured.) Even Franklin already knew of the concept of light and warmth and was looking for a way to harness another source.

Yet you imply that companies must define filters effectively. By setting a direction of selecting and focusing idea generation, they'll definitely avoid waste and cause more innovation in the areas their customer set or strategy dictates. I call that cinching. See this blog for more context: http://www.winmarkets.com/archives/2006/03/cinching_creates_more_value.html

Posted by: Nilofer Merchant at September 11, 2006 09:47 AM

all the big tech vendors appear to have taken your advice.

They spend on average 10% of revenues in R&D (IBM 6%, MS 13%), most of that is tweaking older products then and 30 to 50% in sales and marketing hyping up what little they innovate.

From a customers perspective how can that be good?

Posted by: vinnie mirchandani [TypeKey Profile Page] at September 11, 2006 09:52 AM

I recently read The Medici Effect, which posits that the easiest innovation comes at the intersection of disparate ideas. The author believes that innovation at the intersection is much more rapid and much cheaper than in more established disciplines. Decent book, interestsing ideas.

Coupled with your argument, I would say that this is a resounding argument for diversity in the workplace. Having interesting people from different backgrounds in a stimulating workplace and listening to them is probably the most effective way to generate innovation. We aren't in a cold war anymore, so giant expenditures on R&D labs just aren't the best way to go.


Posted by: Morgan Goeller at September 11, 2006 11:07 AM

Glad to see you posted the highlights of your interview, because the WSJ costs, what, $1.50?

Innovation as a management decision? Right.

I can picture a manager or even a team saying "Let's create something innovative!"

Of course in my picture all of those team members are straight out of Dilbert.

Posted by: Mike Drips at September 11, 2006 01:53 PM

Merchant, Agreed. I discuss a lot of that in the interview.

Vinnie, Not sure that % of revenues is good measure for R&D effectiveness. I think, for instance, Microsoft may have created more value for customers if it had spent less but with greater concentration.

Drips, I believe it costs $1.00 on newsstands, which seems like a good buy. There are two decisions: where to innovate, and how to innovate. You're focusing on the latter (which is where most people focus by default). In the interview I focus on the former decision: where to innovate. That's a strategic rather than a tactical decision and hence is a management decision. Where should be thought through carefully before wrestling with How. You can find more of my thoughts on this issue here, for free.

Posted by: Nick Carr at September 11, 2006 02:36 PM

http://www.cooperationcommons.com/cooperation-commons/my-thoughts-for-the-day-that-s-in-it

Things happen much too fast in the modern world.
It is like George Soros says, you make a plan, then because you have made a plan, the environment changes. So the plan you were making, is already a plan tailored for a different time and condition.

So given that fact - the quick feedback mechanism in today's society - I think there is a real argument to be made for slowness, and selectiveness.

Posted by: Brian O' Hanlon at September 11, 2006 03:47 PM

Your Journal comment about Gateway. My experience with Gateway is that they hired a bunch of incompetent techs and the management (or lack of) hid behind a warranty that basically said any Gateway incompetent employee can trash your system and Gateway is not responsible. Read the very fine print in the warranty, for the Gateway customer it's worse than worthless. As a company they keep heading south and replacing management but the real problem is a worthless group of employees and a management (from the top down) that hides behind the most worthless warranty in the market.
Bob Kozlowski
Nu Engineering
Garden Grove, CA

Posted by: Bob Kozlowski at September 11, 2006 07:25 PM

Nick, you really need to read Christensen's 'Innovator's Dilemma'. The problem is that you don't get to decide where your potential competitors innovate.

Posted by: Kevin Marks at September 12, 2006 06:38 PM

In this day and age, it is the innovators that take the brunt of prejudice. Black hat, rational, spreadsheet competence is most valued in the market at large. The S&P 500 corporations don't have much room for the long-haired, T-shirted creative classes.

I understand where you are coming from. In the blog echo chamber, somewhat like at Woodstock, creativity, innovation, free love, and naked conversations are all the rage.

Posted by: Paul Elosegui [TypeKey Profile Page] at September 13, 2006 05:33 AM

You are wrong this time, Nick. Tim Bray is wrong too. People guess where the next big thing will come from every day. Otherwise, it wouldn't happen. But the next big thing isn't inevitable; it also has to be lucky, but most good things do have an inevitability about them given the technologies and social forces of which they are made. What you and Tim are really talking about is who gets the credit and the profits. The first requires careful face management and the second requires careful resource management, so you are both right there.

Otherwise, you dissect a lot of corpses to learn how to heal or to scuplt. Cost of business and art. Guys in garages have less to risk and less to lose, shovels and access to the graveyard.

Posted by: Len Bullard at September 13, 2006 09:57 AM

You don't invent the next big thing: you breed it.

http://lamammals.blogspot.com/2006/09/on-innovation.html

Posted by: Len Bullard at September 13, 2006 12:44 PM

I have to respectfully disagree. Like all things in life, the secret is balance.

True innovations, by their nature, don't respect established boundaries.

It's critical to figure out what the core value of your new technology to the market is and then ensure that you don't compromise that value. It's quite possible this will mean some work that looks tangential to the purpose, and entrepreneurs can expect to be chastised by their VCs to stick to their knitting. However, playing it safe often leads to me-too products that fail to excite the market.

Posted by: barmijo [TypeKey Profile Page] at September 13, 2006 02:43 PM

Quote:
In this day and age, it is the innovators that take the brunt of prejudice. Black hat, rational, spreadsheet competence is most valued in the market at large. The S&P 500 corporations don't have much room for the long-haired, T-shirted creative classes.

--

Yeah, I will agree with this.
There is a reason for it though. As the new platforms have enabled groups of people to cooperate more easily, they have decided they don't need the talent anymore. The trouble with the network, is the potato, and accountability gets passed around so quickly, that collective authorship cannot work properly.

Usually, the orchestrator, who should be in the thick of it, helping it to happen, is isolated from the group, who shun the creative person. Nick calls it the loss of context, the loss of the author. It is also a loss of accountability. The Enron melt down kind of situation, where the leaders lose all control. Kevin Kelly was right, you need to relinquish some control, but not all of it.

This is all too common, I am afraid, in the commons.

Posted by: Brian O'Hanlon at September 13, 2006 02:45 PM

Having said that though, if a creative long haired person, can come down a peg or two - and join Edward do Bono's black hatted crew. There is nothing at all wrong with black hats, except when used in isolation. The trouble with the creative individuals, is many never tried on a black hat period. This is even worse.

We as society, are denied the opportunity to benefit from the good things creative people can do. I used to hang out with the gang, who made a point of wearing every hat, besides black. It was a mess. I now work underneath a whole load of black hat wearing workers, and I have never learned more or asked more useful questions, in my entire life.

Posted by: Brian O'Hanlon at September 13, 2006 02:51 PM

My description of the blog echo chamber:

http://many.corante.com/archives/2006/06/07/reactions_to_digital_maoism.php#123388

Posted by: Brian O' Hanlon at September 13, 2006 03:09 PM

Nick

Sad fact is that management has a poor record at directing innovation. Four out of five new product ideas fail the first time and three out of five fail the second time.

I would be interested to hear how you would direct innovation to regularly deliver the winners you imply.

Graham Hill

Posted by: Graham Hill [TypeKey Profile Page] at September 14, 2006 04:11 PM

If Dell didn't innovate in the process and supply chain area (which wasn't common at the time), they would've been just another vendor. I think part of the power of innovation is looking at uncommon areas (hint: it's not all the product...the product matters a lot to consumers, but it can be other things to). For example...what if ("gasp") a cell phone carrier had knock your socks off customer service.

Posted by: Anonymous at September 14, 2006 07:34 PM

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