I was intrigued by the IBM Institute for Business Value report titled Insatiable Innovation.
I like the title. America has lead the world to desire, expect and consume innovation at an increasingly rapid pace. The report passes no judgment on this phenomenon. The researchers, however, should ask if this is a good or bad thing. They do not address innovation fatigue or the development of movements like slow food or slow education, both of which offer innovation by its most traditional definition, not the current one, which seems to be: how much faster can we make technology that makes things faster? The “slow” movements offer innovations counter-indicative to speeding up the pace of revenue and change.
The core question, and an overwhelming uncertainty that should be at the top of every innovation researcher’s agenda is: how to we measure success?
The core question, and an overwhelming uncertainty that should be at the top of every innovation researcher’s agenda is: how do we measure success? Organizations can measure success by creating innovations that lead to process improvements, thereby offering formerly more expensive products for less money. Several mobile vendors, for instance, offer “innovations” in low-cost versions of premium products that are, arguably, the result of applying lessons learned to manufacturing, along with less expensive materials, to produce a high-end phone for a greatly reduced cost.
IBM breaks innovation into three categories: product innovation, operations innovation and business model innovation. In Business model innovation, they state “motivating creation of sophisticated ecosystems of products, services and experiences.” The last item, experiences, should encompass relationships, which isn’t mentioned explicitly by the report.
Longevity and value of the relationship serves as another way to measure success. Does the value proposition of the organization offer enough so that customers remain loyal over long periods of time? This measurement might employ different types of innovation, such as the customer service focus of a store like Nordstrom, which despite the reality that it is a distributor of other organization’s products, it has full leverage over the buying experience itself.
Kahn Academy’s measure of success probably wasn’t even a phrase before they existed: the flipped classroom
At Kahn Academy, innovation comes from the viral spread of knowledge through rather low-fidelity technology explanations for topics like algebra and statistics. Technology does play a role in reach, and the ability to quickly create lectures is key, but the real innovation is the accumulation and facilitation of content. Success comes from meaningful curation. If the content wasn’t good, easy access to it would not matter. Kahn Academy’s measure of success probably wasn’t even a phrase before they existed: the flipped classroom, in which students watch lectures at home on their computers or televisions, perhaps even with their parents – while educators employ class time to ensure students understand how to apply the lecture material. This innovation, a true game changing impact for Kahn Academy, increases awareness and demand but really has nothing to do with them. Educators decided to make this choice about flipping lecture and application, not Kahn. Most metrics of innovation would apply this idea to public education rather than to the companies that made it possible.
There are many other ways to measure innovation success. Insatiable Innovation however, fails to offer alternatives to listings in BusinessWeek, market capitalization and revenue growth, all of which are extremely complex measures to tie back to innovation. The report does point out that the mix of innovation is important, but whenever mix is involved, it becomes rather context sensitive. It is almost impossible to discern the components of the mix, and even then, the application of mix knowledge to another firm will likely prove meaningless. IBM and Microsoft are listed as Top-10 Most Innovative companies, however the transfer of product knowledge, value realization and revenue streams from acquisitions, for instance, is so different, it would not be possible to emulate that innovation in other firms. Same goes for R&D investments, which both companies measure and report very differently.
The findings on operational innovation also have issues. Although FreshDirect partners with local producers, using analytics to extend their inventory as a supply-chain component, the Boeing experiment to coordinate the global sourcing of the 787 turned out to be an abject failure. They may be at different scales, but the distribution of innovative values, as the report calls it, is like most innovation, inconsistent.
IBM and other researchers must be careful when offering third-party assessments of performance. What is needed is a deeper definition of both: performance and innovation that can be applied universally, rather than appraisals derived from other sources.
If we get to the point that automation can effectively feed and clothe people, then what innovative idea will create meaningful, paying work for people in the future?
The report does draw a meaningful image when it reports that “CEOs recognize that technology has become the most important external force.” This is tied to an early question in the report —Is innovation dying? —followed by a look at slowing productivity as a potential proof point to innovation’s death. Slowing productivity may actually be a result of innovation, not an indicator of its demise. As Erik Brynjolfsson and Andrew McAfee point out in Race Against the Machine, investments in automation are increasingly displacing the need for human capital. Interestingly, the IBM report points out the need for business model innovation. The move to lower numbers of people (combined with lower wages for those employed — Foxconn, the maker of “I” devices for Apple, is offered as a supply chain innovator) and higher use of technology in non-mechanical, non-manufacturing fields represents a significant business model change. The question must be asked if operational innovations have become so rampant as to undercut the need for workers even as the global population increases. If we get to the point that automation can effectively feed and clothe people, then what innovative idea will create meaningful, paying work for people in the future? Who will be able to afford even the least expensive “innovation” in technology?
If the backdrop is full of uncertainty, then what is drawn upon it is done so more in chalk than in ink.
And that leads to a final point. Insatiable Innovation offers only a linear future as a backdrop, one that extrapolates from today’s assumptions. Innovation and innovation analysis benefit from the use of scenario planning. In the analysis, the deconstruction of social, economic, political, environmental and technological forces can create a humbling backdrop upon which to draw conclusions. If the backdrop is full of uncertainty, then what is drawn upon is done so more in chalk than in ink. And in scenario planning one conclusion is never enough. Researchers must extrapolate through multiple divergent futures, not just the one they or their organization hope for. (Not all organizations will, as the report states: “become more open, transparent and collaborative;” some futures point to a rapid narrowing of openness under the right circumstances.
Scenario planning is a proven technique for driving innovation. Crowd sourcing and social are the poster children for innovation techniques in IBM’s report. But many other techniques are required to drive innovation. Scenario planning forces people to admit what they don’t know, places their assumptions, their aspirations and their imaginations in sometimes uncomfortable contexts. Scenarios help people see challenges and opportunities with a new perspective. IBM would have done well to apply a little more innovation to their analysis—we do need innovation, and we do need to understand it, but that understanding needs to be much more diverse and challenging than observations that point out big companies with hot products and processes making large sums of money faster.
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