Innovator Instigator

Every innovation, no matter how powerful, needs that initial kick-start. The kicker of the Innovatrium, an Ann Arbor, MI-based innovation ideas laboratory for corporations, is Executive Director Jeff DeGraff, a University of Michigan Ross School of Business clinical professor of management and organizations. Training magazine picked his brain on what gets innovation going, and keeps it alive long enough to benefit organizations—and their customers:

Training: How would you define innovation?

Jeff DeGraff: While innovation traditionally is defined as useful novelty, when most people talk about innovation, they think about gadgets or miracle drugs or perhaps a creative ad campaign. More so, when we look at a list of "the most innovative companies" from surveyed CEOs, the attributes include everything from strong brands to stock prices. Here lies the problem. In most firms, when the term 'innovation' is thrown around, leaders don't mean the same thing. For example, in a packaged goods firm, the head of manufacturing may use the term to mean continuous improvement, while the director of marketing may utilize it to focus her team on the customer experience. If they don't have a shared understanding of the word innovation, they won't be able to build a common outcome together, and actually may be at cross purposes. Progressive firms are widening the net on where, and how, innovation happens in the organization. While there are many differences in the types of innovation, there are some common dynamics. An innovation has to make some valuable activity or object, better or new. In the process, it typically displaces an established way of doing things or destroys something old. Over time, the innovation morphs into the anti-innovation, the old thing that must be undone. A good example is e-mail. In less than a decade, e-mail went from a time saving solution, to a time wasting problem. Predictably, a new solution will replace e-mail, and the innovation cycle will continue ad infinitum.

Training: What do you think the status of innovation is at most companies?

JD: Innovation is currently enjoying a renewed status as the "key to value creation" because the easy growth opportunities of the last 25 years, from the productivity gains of pervasive information, technology, and a rapidly developing global market, steadily have declined. Incremental gains now go to the cheapest labor markets. Or they have become automated by technology or simple applications. The low-hanging fruit has been picked.

What is particularly alarming is some U.S. firms have made significant cuts to research and development at the exact moment when more robust forms of innovation will be required to remain in the forefront of their industries. Conversely, a promising trend is the radical new collaborative innovation tools and techniques that are emerging in fields such as biotechnology and eco-energy. Innovation is the only value proposition that has a shelf life. Like milk that has gone bad, an innovation only remains as such for a brief time. From big pharmaceutical firms to mega-automobile manufacturers, the new eventually will overtake the better. This happens in every age, and there is no reason to believe ours will be an exception.

Training: What is the biggest innovation killer in organizations, and what can a person who is in a training or learning and development role, do?

JD: By far, the biggest inhibitor of innovation is a culture of effortless superiority. In firms where everything must be perfect the first time and every time, it's highly unlikely they will create anything unique. This is the unstated danger of overreaching quality programs. If there are no places in an organization where imperfection, or slack, is encouraged, the variation and experimentation required to drive innovation will be smothered, along with the towering revenues they bring. Unlike ordinary management, where failure is to be avoided, breakthrough innovation requires we accelerate the inevitable failure cycle to arrive at the future first. And there is no data on the future; no one can predict when breakthrough innovation will pay. This is what we call a convex or intangible form of value. It is why we pay a premium for growth stocks. Edison famously bragged about his 10,000 failures en route to the lightbulb. He knew innovation is about what we learn along the way.

Training: What are a few examples of companies today that are taking the lead in innovation?

JD: There are four types of innovation that largely determine an appropriate innovation culture and its complementary competencies. These four types are NOT determined by personality preferences, but rather by how these types produce specific value propositions. These indicators are used to predict the growth rates of firms and their stock prices. Each of these forms has recognizable innovation practices and indicators—an innovation playbook. There are generative forms of innovation (create) that produce radical new products and services and are used to speculate new emerging markets—think Genentech. The opposite forms of innovation are technology-based (control) where efficiency and quality are essential, as in medical procedures or heavy manufacturing—think Toyota. These competing types of innovation are defined by a difference of magnitude and associated risk. There are business forms of innovation (compete) characterized by the pursuit of profitability at fast speeds—think Goldman Sachs. Finally, there are social forms of innovation (collaborate) that often are post-capitalist as they pursue the development of helpful communities and the sharing of knowledge—think Linux. These last two competing types of innovation are defined by a difference of the speed and sustainability. There is no one type of innovative company. How a firm innovates determines what it innovates. Creating value from innovation is mostly about connecting these dots.

Training: Based on your research, do larger, more unwieldy organizations have more trouble with innovation than those that are on the smaller size?

JD: Firm size usually is taken as an indicator of relative maturity, but there are significant exceptions to this assumption such as Google. Start-ups lack the capital and reach of incumbent organizations, so they must rely on significant differentiation to establish their presence in a market. This is why smaller firms are often newer, produce more radical forms of innovation, and assume a much higher risk profile. For every 20-person biotech [company] acquired by a pharmaceutical giant for a billion dollars, there are hundreds that never make it. These nascent firms take a "forward position" in the innovation development cycle as they create new products and services, and speculate emerging markets first, but lack the scope and scale to fully develop them. Larger corporations typically are more established and occupy the "aft position" because they have the ability to grow through the acquisition of smaller companies. It is not so much that these giants cannot radically innovate—consider IBM—but that they choose not to assume the risk because they have markets and shareholders to protect. In the end, small companies either cease to operate, or become large companies, thus completing a turn of the innovation cycle. While firm size used to be an area of substantial debate among academics, the focus has changed—companies no longer compete as individual entities, but rather as federations.

Consider the products and services of Apple that integrate a host of music publishers, mid-size Taiwanese manufacturers, and two-person application developers into a seamless iSolution. Where does the company begin and end? In the age of crowd sourcing and idea markets, Wikipedia, and InnoCentive, firms of all sizes must develop, acquire, or align themselves with the full range of innovation attributes, from revolutionary to evolutionary.

Training: Does technology, such as sophisticated collaboration platforms and cutting edge internal Web 2.0 tools, necessarily aid corporate creativity, or is it more complicated than that?

JD: The convergence of the information technology and innovation space may be the most significant development in this field during the post-industrial era. Endless connectivity, deep global pools of expertise, and the ability to manipulate and move data across platforms markedly increased the speed of innovation. But research on the effects of these collaborative innovation networks, or CoINs, as they are called, is far from one-sided. One study suggests teams increasingly are crossing boundaries and domains to produce more frequently cited research, and that this trend has fundamentally changed how knowledge is created. On the other hand, a series of other studies reports top innovators primarily network only with other top innovators and that breakthrough innovations travel exclusively in these elite groups.

High-quality patents are taken as evidence of this tendency. So it may be that teams are more effective in creating incremental to moderate forms of innovation, while smart set individuals, who produce fewer tangible innovations, are more likely to develop breakthroughs. Again, the nature of the innovation, and the specific part of the process, are the key. The new maxim might be to enlist the crowd to spot an opportunity, but engage deep domain experts to create it.

Training: When creating innovation workshops for employees, is there research to suggest it's best to divide into small groups, such as by job role or level?

JD: There is basic organizational psychology research that suggests small groups outperform larger groups in terms of the number and quality of ideas they can generate in a given period of time. The old divide-and-conquer approach. But related studies underscore the importance of these groups regularly meeting to exchange ideas and knowledge. They discuss what's working and what's not. Trainers often refer to this activity as "search and reapply." Finally, in addition to small group work, the collective group has a creative function in developing potential improvement points and divining simple rules that can be integrated into the routine practices of the smaller groups and the organization-at-large. This attention and incubation step is the foundation of organizational learning.

Training: How have innovation initiatives at organizations globally evolved over the last five to 10 years?

JD: There are two basic, almost oppositional, trends over the last decade. First, initiatives are more likely to be globally synchronized to leverage the wide range of know-how that comes with diversity, and to reduce development times. For example, Boeing might work on a cockpit interface prototype in Chicago, transfer the work to Bangalore, and finally move it to Shanghai in a single day. Each part of the organization typically has a specialty that contributes unique value to the global matrix of the corporation. A shared information platform, common processes and practices, and a basic understanding of one or more languages are required to make this sort of initiative seamless. Still, no matter how integrated the systems, the handoffs are where initiatives typically are fumbled due to misalignment issues that are not technical, but related to sense-making.

The second trend is smaller firms are undertaking much more substantial and complex initiatives. Developing a blockbuster drug used to be the sole domain of major pharmaceutical firms that had thousands of researchers at their disposal. But a closer look at the industry reveals many tier-one and two biotech firms, with fewer than a hundred researchers, have brought more game-changing therapies through the Byzantine FDA approval process than their much larger peers. This is because technology, talent, and capital are readily available to smaller firms working interdependently with each other. Where there used to be economies of scale, there now are dis-economies. The challenge with this trend is in designating and protecting intellectual property.

Training: What kinds of innovation techniques and practices will we probably see more of over the next decade, and why?

JD: There is a strong movement toward data-driven innovation. Computing power, storage, and connectivity have blurred the boundaries of imagination and simulation. The endless availability of information, and the tools to focus it, brings the new-found ability to detect an underlying problem set, find an uncontested market, or render a three-dimensional prototype in an instant. The technology becomes the pen, the brush, and the strings in much the same way our children play video games, where they create worlds within worlds.

There are hundreds of computer-based innovation applications that range from simple brainstorming tools to complex algorithms that predict the potency of a portfolio of patents. What is unclear is how these tools limit our imagination and our ability to construct novel solutions that fall outside the parameters of the toolkit. More so, neurobiologists long have suspected there are several levels of creativity that go beyond stimulating new ideas. In the face of ubiquitous technology and connectivity, an alternative series of techniques such as mediation and improvisation are emerging from a wide range of disciplines where inner-knowing, shared vision, and communal dialog are thought to produce more authentic forms of innovation. Intimate insight may turn out to be more prized than the on-demand torrent of possibilities.

Training: One of your specialities is "jump-start" innovation events that trigger the innovation mind-set in organizations, which hopefully then enable them to take it from there, and create winning products and marketing strategies. What is your top innovation "jump-start" tip for trainers reading this article?

JD: Momentum is everything. The flow of good ideas happens every day, everywhere, from the morning shower to the long commute home. The trick is to develop a team of engaged people to recognize and own their best ideas. No one resists what they, themselves, have created. Even if the team proceeds with mediocre ideas, they will discover this along the way, and rework them as necessary. The importance of alignment is overrated, and diversity underrated. Select participants as you would for an engaging dinner party, where the guests like each other, but don't share the same point of view. Encourage constructive conflict and, most importantly, step back when the team becomes animated and energized. In the end, innovation is terra incognita, and the only way to the undiscovered country is to travel through the unknown.