INNOBLOG

Companies just starting innovation efforts often begin by getting a group of people together and telling them "It's innovation time!" I've never seen efforts like this succeed in meaningful ways.

Instead, we suggest that companies begin innovation efforts by creating an innovation strategy that details clear targets and tactics.

Clear targets help internal innovators know what they're shooting for. A reasonable starting place is to imagine what success looks like five years in the future. Are you seeking to double your business? Hold it steady? Something else? Setting a target that is several years in the future can help to de-politicize a potentially charged discussion.

Then think about the sources of growth. How much can you reasonably expect your core business to contribute? In some industries your five-year contribution might be below today's contribution, and that's okay.

Next, look at what's already in your development pipeline. What can you reasonably expect that pipeline to contribute in the future? One tip here: make sure to risk-adjust your pipeline. If you assume all of your projects will succeed, you are being wildly optimistic....

Read the rest at Scott's Harvard Management blog, Innovation Insights.

This article was co-authored by Michael Putz, a Business Development and Strategy Director at Cisco Systems. Putz was an integral contributor to the ideas presented in Seeing What’s Next through collaboration between Cisco and Clayton Christensen on the future of the telecommunications industry. The post reflects the personal views of the authors, not of Cisco Systems.

Click here to read Cuil's Dangerous Strategy Part I.

New-search-kid-on-the-block Cuil Inc. has its work cut out for itself. First, it has to fix embarrassing bugs that plagued its hotly hyped launch this week. Then, it has to figure out how to break from the pattern showing that companies that try to leap over market leaders with a better-performing product typically fail.

Cuil could look to Apple for signs of hope. Apple was far from the first mover in the digital music space when it introduced its first-generation iPod in 2001. That player was superior, and more expensive, than devices offered by Rio, Cabo, Archos, and others. Apple’s iPhone was a late entrant to the smartphone industry. Research in Motion, Motorola, Nokia, and Samsung are still struggling to match Apple’s intuitive interface and powerful computing platform.

In both cases Apple entered an established market with products that were functionally superior to established products.

Harvard Business School Professor and Innosight founder Clayton Christensen’s research found this approach — which he termed a sustaining strategy — tends to not work because it entices devastating response from motivated incumbents who have the right skills to fight back.

In fact, in 2007 Christensen publicly predicted the iPhone’s failure, telling BusinessWeek: “The iPhone is a sustaining technology relative to Nokia ... History speaks pretty loudly on that, that the probability of success is going to be limited.”

Yet, Apple’s digital music strategy has been an unqualified success and its mobile phone strategy appears on its way to similarly rarefied heights. Why has Apple been able to buck the trend? In both cases it recognized that it had to create a completely different value system to disrupt an entrenched incumbent value system.

Read the rest on Scott Anthony's Harvard Business blog, Innovation Insights.

I love accountants. Heck, my grandfather is in the Accounting Hall of Fame (I’m not kidding, check out the Web site). But when I see an article pairing an acquisition of a company with a widely lauded culture with plans to achieve substantial cost savings, my blood runs cold.

The article in question described Roche Holding AG’s $44 billion bid for full ownership of Genentech. For close to 20 years, Roche has masterfully managed a controlling economic interest in the biotech pioneer. One key to success has been allowing Genentech to follow its own course and reaping the benefits of products that would never have come out of Roche’s labs.

Today, Roche hopes that tighter integration will help to spur its own development process. And, of course, it hopes to achieve substantial cost savings “by combining the two companies ‘ clinical research teams and sales, manufacturing, and administrative departments in the U.S.”

So-called cost synergies make perfect sense — on paper. Through an accountant’s eyes it appears wasteful to duplicate functions that perform the same basic task.

What’s hidden however is how combining functions can destroy what’s unique about a company.
 

Read the rest on Scott's Harvard Business blog, Innovation Insights.

A front-page article in yesterday’s Wall Street Journal illustrated how important it is to periodically revisit the assumptions behind an idea.

The article described how several years ago, the head of Sacramento’s regional planning agency started to push developers to concentrate growth in defined areas rather than furthering suburban sprawl. The argument hinged on lowering pollution and fostering economic development.

Of course, with the price of oil shooting up, today the idea looks remarkably prescient.

I wonder, however, how many planners rejected similar ideas because they couldn’t imagine people making living decisions based on the cost of commuting, and how many now wish they started dusting off those rejected plans when signals emerged suggesting that circumstances had changed.

On the other hand, sometimes circumstances change in ways that undermine ideas that once seemed credible. Consider Motorola’s daring, and ultimately doomed, venture to provide satellite-driven mobile telephony.

Read the rest on Scott's Harvard Business blog, Innovation Insights.

This post is coauthored by Innosight Managing Director Matt Eyring.

Seeing coverage of this week’s baseball draft made us realize how much companies can learn about innovation from watching how great baseball teams manage their early portfolio of talent.

Baseball teams have to assemble the best talent possible, just like companies have to bet on the best innovation opportunities. A baseball team chooses between acquiring talent on the free agent market or drafting and building talent. A company chooses between acquisitions or organic growth.

Acquisitions are expensive, but perceived to be lower risk, because the talent (or idea) has proven itself demonstrably in the marketplace (for baseball, that means success on a major-league diamond). Organic growth is typically cheaper, but perceived to be risky because many times highly touted initiatives or prospects don’t pan out.

Baseball teams know that talent follows a power-law pattern, where for every 1,000 players there are 100 players that are capable of playing at major league levels, 10 of whom are legitimately good players, and 1 of whom is a true superstar. The same is true for innovation.

The challenge is: Which project or which player? Just as a baseball team doesn’t have complete information about what a player’s true level of ability is on draft day, you don’t know the real potential of any one innovation project.

Both of you are forced to deal with incomplete data. A team has to rely on a mix of limited performance data at the high school and college level and an assessment of a player’s inherent skills. Good teams collect as much data as possible. They have sophisticated models to project how rough performance can project to the major league level. Good teams also let past patterns inform their decisions. High school pitchers? Very risky. College hitters? Much less risky.

With a well-organized scouting team, you should gather multiple data points in preparation to “draft” innovation opportunities. Get the very best market data you can, look at past successes and failures to see what lessons you can glean, and use qualitative metrics or patterns to guide decisions. ...

Read the rest at Scott's Harvard Management blog, Innovation Insights.

"What’s best practice?” Just about any manager seeking to improve corporate performance has fielded this question from leadership. The theory is that the manager should find a successful company, find out what practices have made them successful, mimic those practices, and expect success.

However, blindly worshiping at the altar of best practices is dangerous. The problem is that practices that work incredibly well in one circumstance can be ill-suited for another circumstance. Even if your company has successfully overcome a problem in the past, it is always worth asking if the circumstances have changed in a way that means your approach needs to change as well.

Read the rest at Scott's Harvard Management blog, Innovation Insights.