Wednesday, 30 November 2011

‘Not Everything That Matters Can Be Measured’

What’s the point of innovation performance metrics?

‘How should I tell my boss to measure my teams performance?’  This is a question I was asked by a client recently appointed to head an innovation incubator team within a large multinational.  It’s a pretty good question. 

She wanted to establish the ground rules before her sponsors designed the metrics for her.  This was a smart move, we all know how difficult it is to measure anything but ‘near to launch’ innovation.  The further away, the more risky or the more ambiguous the innovation the more dangerous innovation metrics can be.  The situation was exacerbated by the mixed portfolio of ideas, each subject to different technology, regulation, state of market development – a complex and dynamic innovation challenge.

So, to help with my clients quest I took soundings from innovation leaders managing multiple probes, partners and projects.  They were pleased to help and keen to hear my conclusions. 

For such a critical question I’d have expected to hear a well-worn measurement methodology.  I was disappointed.  I was searching for something that doesn't exist – there is no winning formula or established convention for measuring long-term innovation bets.  But there are a couple of perspectives on the subject my client did find very helpful – two golden principles in the absence of a silver bullet!

Golden Principle #1:  Manage expectations fast

Most holders of purse strings know it’s damn difficult to put hard measures to soft concepts.  But many haven’t heard a cogent argument as to why, so they just keep asking for the usual NPV or DCF analysis, you waste time cooking up easily gamed numbers that both parties have little faith in.  So here are my arguments that make a tame puppy of that scratchy beast of a finance director:

1.   There’s a double uncertainty to measuring ‘over the horizon’ innovation.  Discounted cash analysis often paints an optimistic picture as it measures an uncertain upside versus steady state finances – but as we all know if we don't innovate our state will be anything but steady – at best uncertain, but probably declining.  Conventional accounting isn’t built to handle this much uncertainty

2.   Large corporates demand big results from incubator programs.  There are a lot of zeros flying around.  But this isn’t how big innovation is born, most game changing innovation starts small, ugly and unrecognisable – it certainly doesn't have big numbers to begin with.

3.   Corporate accounting favours sweating existing assets – and why not?  But existing assets (people, factories, technologies) are unlikely to give birth to great innovation.  Newcomers are unencumbered, they will account for the optimal asset at marginal cost.  This is very efficient and will enable small players to make much gutsier decisions like supertanker corporations.

4.   Every business and every innovation project is different.  For instance it’s unlikely that Option Based Pricing (how much does it cost to get to the next decision) advocated by some in the pharmaceutical world (where project stages are long, well defined and accurately priced) are going to be much use in the frenetic world of say food and beverage innovation.  There is a real opportunity cost to measuring the immeasurable!

Golden Principle #2:  Metrics are for Dialogue

So if there is no metric that can accurately measure the return on incubator investment what can we do?  Fortunately the answer is simple – it's not the solution your boss might want to hear but’s it's a good answer nonetheless.  The point of incubator innovation metrics is to promote dialogue, to start valuable conversation.  Simple as that.  Kicking the tires on an idea is a priceless activity for senior management to engage in with incubator teams.   It is simple and imperfect metrics that will drive this to happen, whereas relying on seemingly accurate measures merely serves to distance incubators from sponsors.   Here are six different types of innovation incubator metrics that could form a balanced framework.  Maybe you’ll spend your time discussing better ideas, not cleverer measures?

1.   The ‘No Math’ Approach.  One big target number and one non-risk adjusted pipeline value.   If the pipeline value is 10 times the target then maybe that’s good enough.  Very simple, very fast.

2.   Risk Adjusted Valuation.  The standard innovation metric.  Working backwards from the desired financial outcome and factoring for anticipated innovation failure do we have enough probes and projects today?  Are we kissing enough frogs?  Working this through with a client recently we were able to quickly show that we needed five times the size of pipeline to hit our clients objectives.  Unwelcome but important news.

3.   Fast Faking Metrics.  How quickly are we prototyping ideas, moving them on or rejecting them?  You could measure idea ‘flow speed’ or conversely how ‘sticky’ the pipeline is – like unsold inventory there’s a cost to stalled ideas.

4.   Foundation Metrics.  Track a limited number of drivers, or precursors of success.  Instead of spending time measuring say the value of a solar panel innovation project, instead track the drivers of solar panel growth; new home construction, changes in technology efficiency, government legislation etc.  Focusing metrics on conditions for success forces us to exercise judgment muscles around the concept itself.  

5.   Skin In The Game Metrics.  Allow the intuition (ie the sum of all experience) of wise heads to score your innovation.  Ask the Incubator team to ‘buy in’ to options (real cash must change hands).   The Financial Services sector likes predictive markets - trading ideas using a virtual currency.  GE pushes many of it’s probes to JV calculating this will ‘prove them out’ better than actuarial techniques.

6.   Incubator Health Metrics.  How engaged are the team?  What is their reputation?  What’s the ratio of the team’s ‘useful time’ to ‘form filling, courses and reporting’? How many unsolicited job applications?  Boeing rate ‘how often the incubator asks for help’ as one of their most useful and telling measures.

(Thanks to my colleague Tobias Rooney who helped me build this post)

Wednesday, 2 November 2011

Innovation in China

Huge opportunities, but subtle and nuanced

I’ve just got home to London from my 8th trip to China – ?What if! have a thriving office in Shanghai and visiting them every 9 months or so is sufficiently irregular to really get to feel the change in this vast country.

Here are my top five observations for anyone interested in innovation in China, these are things well known inside the country and experienced everyday by my colleagues in Shanghai, but not easy to glean from outside.

1.   Yes China is big.  With a population four times the US or Europe, a rapidly growing middle class (300 million people will move to the cities in the next five years) and the world’s largest market for lap tops, autos and mobile phones……every statistic is mindboggling and yet the country is still growing (10% GDP growth pa).  So yes, the market is big but it’s the pace of change that throws up so many innovation opportunities.  Increased competition means brands have got to stand out, they need relevant features – overnight companies in China are having to swap their distribution skills for branding and critically innovation skills.

2.   Like all Asian countries China has a tradition of government direction and assistance to certain sectors.  The technology transfer policy so unpopular with foreign companies has a limited shelf life, the latest Five Year Plan promotes ‘indigenous innovation’ and sets aside $1.7tn for high tech, bio and green energy sectors.  Within these sectors local companies are free to compete and make a lot of money.  This is innovation strategy on a grand scale; set the strategy at the top, allow entrepreneurs to run free within a few focus areas.  The need for innovation is on the top teams agenda!  I have lived in Bangkok, worked all over Asia and have a home in Kuala Lumpur – I’ve seen up close how effective this tight-loose sector priming can be.

3.   Chinese are great consumers, they love brands, they love gadgets and the latest technology.  Commercial TV is now national, everyone can see what the wealthy urbanites are wearing, eating, driving – and given that only 25 years ago there was very little to buy and everyone was more or less equal there is a volcanic force of consumerism that will erupt for years.  But choosing, buying, paying, consuming and gossiping about products is very different to the West.  The rules of global brand management don't always work in China and we’ve worked many projects unpicking the Western import idea and recalibrating it for local consumption.  Potato based snacks, buying on credit, DIY – sound familiar?  Not in China – try rice, ‘pay now’, ‘find a man who can’. 

4.   Innovation is often fueled through questions, argument and stepping onto the boundaries of peers and turf of other departments.  These are concepts alien to the polite Chinese way where respect for the boss and avoidance of loss of face is ingrained.  We have a creative technique called ‘Revolution’ which you won’t be surprised, we don't use a lot of in this part of the world.  It takes real skill to work innovation projects in this environment, our people need to be able to navigate the path between empathy and leadership like I’ve seen nowhere else.

Final observation is that just as many parts of China are still poor many parts of China are visibly wealthy.  This BMW driving, Gucci wearing set will act as a magnet for many urbanites.  Allied to the inevitable drive for more sophisticated products and services are more complex business models.  Chinese entrepreneurs have traditionally jumped sectors following the fastest buck with simple products but many are now faced with longer value chains.  There are new opportunities to segment markets according to new types of consumers and finding a niche in new links of the chain.  Better bigger cars for instance give birth to a host of new needs; servicing, cleaning, driving lessons, insuring and pimping.

Tuesday, 11 October 2011

Teamwork or Collaboration?

While teamwork might get things done its collaboration that drives change 

I read an excellent blog last week by Andrew Campbell and it really got me thinking.

I have always used the words ‘teamwork’ and ‘collaboration’ pretty much interchangeably.  I’ve never thought about the difference between these two words.  But the more I think about it the more important it is if we want to innovate effectively.   

When my football team (come on you Spurs!) recently beat north London rivals Arsenal, they did so not because of great skill but great teamwork.  But not collaboration – to say the players ’collaborated’ to win sounds just, well it just sounds odd. 

By the same but opposite token when my buddy Dave Green, CEO of Harvard Bioscience (see my earlier blog on 25th July 2011: Disruption - A case of 'when', not 'if') innovated the world’s first human trachea he was collaborating on steroids.  He reached out and initiated conversation with a range of partners none of whom really knew where they were heading, who was in charge and what the rules of the game were.  Collaboration yes, teamwork no.

So teamwork has boundaries (90 minute game), it has rules (a referee, the offside rule – which I still don't understand), every ‘player’ has a role and is aligned around what victory looks like (you get one more goal than your opponents).  Collaboration is a different kettle of fish.  The boundaries and rules are created as the game unfolds, roles are unclear and objectives often opposing.  Somehow it’s a messier, more chaotic way of working.

I’m kicking myself over my arbitrary and thoughtless use of these words. The implication for innovation is enormous.  New stuff happens when a new game is defined, when irritating, provocative people spike you to go somewhere you’ve never been before.  New stuff happens when you connect a bit of what you’ve got with a bit of what someone else has – even if you don't much care for each other.  Teamwork by contrast is pretty allergic to grit in the oyster.  By definition the team has to hold back, to pass the ball unselfishly.  The rules are set, we know what winning looks like. Provocative and punchy ideas aren’t really championed, uncomfortable relationships with outsiders aren’t sought out. 

If you look at how Apple have become the worlds greatest serial disruptive innovators, it’s through collaboration.  Many separate parties, figuring out the power balance as they went, most of them with competing agendas but all of them realising that together they might just be bigger than the sum of the parts.  In contrast take a look at the kind of innovation that customers barely register; a new lemon variant of that detergent we’ve bought for the last 30 years, a bank account accessed on line, a hotel that has in room check in.  Undoubtedly it’s teamwork that’s brought these to market.

So maybe it’s as simple as this. Collaborate to innovate disruptively and ‘teamwork’ to innovate incrementally?  The bolder the outcome desired the more you need to recruit collaborators and dump the team.  What’s the action for innovators?  I think it’s 1.) get crystal clear on your innovation goals 2.) if the answer to that question was that you want to innovate big time then take a look at your team.  Conventional management theories tell us we need a team, but I’m not so sure.  I think you need a small band that’s hard to manage, hard to hear, hard to be around.

Wednesday, 28 September 2011

People People – Rise Up!

HR can be a powerful tool of innovation 

At ?What If! we’ve worked with many excellent HR leaders and seen first hand their potential to influence the innovation agenda.  We’ve heard their stories of how they got great at it (and coached many).  But even the most respected and effective HR leaders often struggle to articulate their role in innovation.

At ?What If! we’ve identified eight levers that we think HR should be pulling to enable innovation.  The first four are less obvious but relatively easy to implement so I’ve spent more time on them:

1.   Media plan the boss.  People play safe when they don't know where the boundaries of acceptability are at work.  But countering this by announcing that we ‘embrace failure’ is one of the silliest things to say about innovation, it doesn't help at all.  Fear of screwing up your career is a comically ironic subject.  Most bosses bemoan their subordinates’ lack of guile and guts, whilst the view from below is that bosses snuff out unfamiliar, even slightly risky activity.  HR can play a critical role straightening out dangerous myths around risk.  Easily the most effective route is to seek out stories that demonstrate to what extent the boss appreciates risk, or even takes risks themselves.  Our work on a new insight program for a major pharmaceutical client was transformed when the HR team ‘packaged’ the story of how the CEO was spending more time with customers, how hard he found it initially but ultimately how rewarding.  Very quickly people knew that they had to get out of the office, to experience first hand the role that their brand played in customer’s lives.   HR at it’s very best is like a newsroom.  Collecting the facts, romancing into memorable stories and either helping the CEO get the tone right or even leaking the story.  We all know that gossip powers the grapevine.  Colleagues pay attention to stories about what the boss has done, they tend to disregard what he or she says should happen.

2.   Selective Destruction of Process.  Innovation can be killed by process and the enthusiasm needed to drive ideas over the line wilts in the face of endless rounds of proof.  At SRI in California CEO Curt Carlson (who also serves on the National Advisory Council on Innovation and Entrepreneurship) holds ‘Watering Hole’ meetings where colleagues can appeal directly to him to leapfrog the process.  At UKTV (the new Scripps / BBC Worldwide joint venture) CEO Darren Childs is speeding innovation by inviting swift ‘on your feet’ pitches for any innovative idea’s – from new TV shows to technology disruptive to core business.  This ‘process by-pass’ has given birth to a ton of new ideas including a live comedy night and a radical technology investment.  Brilliant HR leaders spot where ‘the way we always do things’ is log-jamming innovation and experiment with clever ways to stick two fingers up to process. 

3.   Stop the organisation being too damn nice!  Recently we were tasked with recruiting a team within a client’s business to peel off and incubate radical new ideas.  We arrived at a meeting with our list of candidates.  The client’s HR people had theirs too.  And guess what – they were 100% different!  HR had picked an articulate, rational and clubbable bunch.  We had picked a different team of obsessive, irritating and outspoken people.  Our joint conclusion was that HR defaulted to team-players; people who knew the rules, knew what wining looks like, were happy with their roles and following the leader.  In contrast we had picked collaborators, people who were emotionally charged, maybe obsessive, definitely passionate.  They were often angry, externally focused, searching for something.  The nuances between efficient teamwork and gritty collaboration are not commonly understood but HR do need to recruit collaborators if they want meaningful change.  The alternative is the commercial equivalent of a sort of Stepford Wives team; polite, comfortable, un-stretching and in the long term deadly.  The best HR directors know how to spot innovators!

4.   Start a Cake Club.  Consider the customer journey of taking a holiday, there are multiple touch-points; choosing, booking, travelling, snoozing on the beach… get the picture.  The point is that while a customer experiences the holiday at an aggregate, joined up level the ‘supplier’ will often be organised in silos, each attending to and being measured on just a slice of the journey.  HR leaders realise that silo led innovation is useless because a bad experience in another part of the chain can ruin good work elsewhere.  HR leaders are well placed to create better networks so that colleagues forge relationships outside their patch.  At Innocent, the recent Coca Cola acquisition, they have a cake club, a cheese club, a beer club!  Why?  The networks forged across departments make business run much more smoothly.  It’s easier to ask someone to stay late and ‘please just run that new product down the packing line for me’ if you’re both in the cake club.

5.   Recruit activists and neutralise the naysayers.  Everyday innovation doesn't happen with ‘quite engaged’ colleagues or in an environment rich in cynics.  You need a strong core of people who give a damn.

6.   Craft a higher purpose.  By definition, innovation is activity outside the familiar, a higher purpose stretches us beyond the products and services we sell today and allows us to play with unfamiliar but still strategically ‘on target’ ideas.

7.   Carve out space and provide air cover.   Innovating as an extra curricular activity doesn't work.  HR can  help innovators carve out proper time and a separate space to ‘think different’.  They are well placed to change the rules around regular updates – the innovation teams need the license to get lost.

8.   Fight the Furrowed Brow.  Innovation can be squashed by the look on someone’s face.  We have trained over 5000 people how to ‘react’ to an innovation pitch, whether it’s a casual coffee station conversation or a super formal boardroom proposal.  HR can definitely change the way people react to the unfamiliar.

Do you agree with this recipe?  Please forward it to your HR colleagues and send me your comments.  Next blog I’m getting into the difference between teamwork and collaboration.  It’s fascinating stuff.  Contact me at

Monday, 12 September 2011

The Unseen Rip

The enemy of innovation lurks just beneath

Last week three things have reminded me how important it is to fight against the unseen rips that can drag us out to sea, rendering us incapable of changing direction.

On Monday I attended the launch of my friend Carne Ross’s latest book ‘The Leaderless Revolution’.  He’s the guy who left a high flying post at the British Foreign Office over the WMD debacle that preceded events in Iraq.  He talks about needing that feeling of ‘falling off a cliff’ in the months that followed his departure.  This self imposed no-mans land gave him the perspicacity to set up Independent Diplomat; a unique service offering counsel to groups and governments marginalised by the international system and rated by Harvard Business Review as one of the top ten global innovations of 2010. 

Tuesday night I had a farewell drink with a colleague who is launching herself into a completely new career as a market gardener – the strategy is summarised as: “I haven't worked out exactly what I’m going to do yet, my brain is 150% engaged when I’m at work, so first I need to create space to explore”.

Thursday morning I swapped notes with a colleague about a session we are involved in next week – the project called ‘Round Pound’ is sponsored by the UK Government and its aim is to spread novel forms of giving. We are part of the Round Pound team because my co founding partner at ?What If!, Dave Allan and I had an idea that for most transactions, retailers could round the total up and donate the balance to charity.  We explored the idea and trade marked the name about 10 years ago, but we got caught in the inevitable currents of life and never realised the idea.  Fortunately today, Alison Hutchinson, an ex-client of ours who is CEO of The Pennies Foundation, a UK based charity had the same idea simultaneously, but unlike us she made a brave choice, quit a great job and in the 10 months since going live, their brand Pennies, the electronic charity box has had 750,000 round pound donations raising £175,000 for 20 charities.

These are three innovation stories and for me poignant.  They don't tell me the only answer to an unrequited idea is to chuck it all in, but I think they’re great reminders that ideas are easy to come by.  Battling them to market requires incredible resolve and focus.  I think that's why my head drops when I hear clients allocate people on a part time basis to new initiatives.  If it’s that important, invest in dedicated, passionate, even obsessive people.  Allow them the space and give them the tools to break free of the current. The Emerging Technology Group in Cisco have a neat turn of phrase arguing that innovation needs to be protected in pockets away from the mother-ship where there’s too much money, too many people, too much love and too much hate.

You might want to check out Carnes fascinating story:
And the good work at Pennies:

Friday, 26 August 2011

Casanova for Chief Innovation Officer?

The dating game can teach us how to innovate

I’ve been married for nearly 20 years so clearly I like giving others advice on dating.  So here’s my simple formula for finding a partner:

1.   Opposites attract – so practice being the ‘real you’, in fact, become a ‘super you’.  Be louder about what you believe in, accentuate your idiosyncrasies.  Don’t bland out.

2.   Lower your standards – kiss a lots of frogs, dating is a volume game and if you’re not in stock no one will buy.

3.   Be tenacious – if you keep asking eventually you’ll get what you want.  (I once made the mistake of asking my wife why she dated me and she said it was because I kept calling, was punctual and ‘in work’. Hmmm).

Right now innovators everywhere can learn a lot from these ‘attraction strategies’.  When we first started ?What If! nearly 20 years ago innovation was all about extending products and services further into their category, to grab more shelf space, throat share, wallet share.  Over the last two decades the pace of change has accelerated and markets have become more blurred.  Fuelled by opportunities the internet has provided and stimulated by brands like Virgin - overnight we’ve all become experts at category mental gymnastics.  

Most innovators I know have gotten very good at thinking broadly beyond their market and toying with adjacent territories.  We’re no longer shocked at Vodafone becoming a bank (M-Pesa), at Tesco becoming a mobile phone company or Amazon selling golf clubs.  What’s next?  KFC buy an airline? (hmmm – long flight, good movie, snuggled up with a bucket of shame – hang on, that's not so bad…).  Innovators today have to think very flexibly about core competencies, the role their brand could play in someone’s life - they’ve learnt to ignore category labels.  My little electric car isn’t a car – it’s a dry cycle, it competes directly with my bicycle and on rainy days it wins. 

So we’ve got good at thinking flexibly about markets and categories, but what about doing something about it?  Can you become the kind of business that doesn't just talk about mashing categories but actually does it?

Here’s where the rules of dating come in.  How can corporations use the laws of attraction to find new partners?

1.   Don't bland out:  Suddenly it’s become very easy to publish a point of view.  Social media affords brand owners more edge, more of a provocative voice, something they need if they’re to meet new organisations that could end up being great bedfellows.  Cisco have a futurologist called Dave Evans, who told me that soon we would all live to 1000!  Provocative perspectives like this attract unimaginable conversations and opportunities.  Partnerships aren’t made just on rational terms, there needs to be some electricity, a punchy perspective on how the world is going to be is a prerequisite for partnership.  A silent company without bloggers, clubs, controversial speakers, a visible opinionated CEO – all this reduces the chances of attracting a mate and co-creating something new.

2.   Incubate new relationships:  You wouldn't go on a first date to your parent’s house.  So too Telefonica subsidiary O2 has pioneered a wide range of partnerships through attracting talent from outside it’s area of expertise and allowing it to flourish away from head office.  O2 looks increasingly unlike a mobile phone company and more like an entertainment business.  Contrast this with Tesco who acquired banking skills bringing them ‘in-house’.  No time or space for a fresh category-busting identity to emerge?  Looks like just another bank to me.

3.   Be tenacious:  Organisations that strive for something beyond current revenue are more likely to develop in unexpected and exciting ways.  IKEA’s corporate purpose has always been to improve lives through making good design more widely available.   It’s because IKEA don't let go of this ‘higher purpose’ that they now make flat pack houses, in partnership in the UK with LiveSmart@ Home.

So let’s promote Casanova to CIO – sounds like fun to me!