THE SIX COMMITMENTS OF YOUR INNOVATION MANDATE
Question: What’s the number one cause of innovation failure?
Answer: A lack of commitment.
This shouldn’t be surprising, because you could say the same thing about many areas of life.
Ask any winning athlete about the key to sustained excellence, and he or she will reply, “Commitment.”
Ask any salesperson, inventor, military officer, or sports coach, and they’ll give the same answer.
Commitment.
Not backing down. Not being half-hearted. Not giving less than one hundred percent.
Your Innovation Mandate is no different.
In our work with leaders of companies large and small, we’ve learned that the ones who spark innovation and keep it going in every corner of their organization are rewarded with sustained growth and profits, year after year.
The leaders who take a half-hearted approach to innovation, who don’t spark and support a sustained effort, experience slow decline and eventual takeover or even bankruptcy.
In previous chapters we’ve discussed Making Innovation REAL with Commitment, Customization, and Creativity.
Now it’s time to drill down more deeply into the many facets of REAL Commitment.
COMMITMENT MUST BE MULTIFACETED (JUST ASK AMAZON.COM)
If you look at companies that have made innnovation an integral part of their organizational DNA, you quickly see that they’ve committed to innovate on many levels.
Take, for example, Amazon.com, which in the past decade has become a true market disruptor. Their record of innovation began with the first simple spark of insight:
People don’t need to touch and handle a book before they’re willing to buy it. Most people would be happy to buy a book from an internet retailer, because the level of trust is sufficiently high.
This simple spark led Jeff Bezos to launch Amazon.com on July 5, 1994.
I’m not going to bore you with the history of Amazon, because you’re probably a customer of the e-commerce giant and know all about it. But you may not be aware that Amazon has a long record of commitment to innovation in areas that you might not think about.
Amazon’s entire business is based on answering yes to two simple questions:
“Do you have what I want?”
“Can you get it to me when I need it?”
Every innovation they’ve introduced seeks to answer yes to these two questions, and they’re not shy about promoting their record of innovation. As their website proclaims, “We’re a company of builders. Of pioneers. It’s our job to make bold bets, and we get our energy from inventing on behalf of customers.”1
Here are just some of the innovations pioneered by Amazon:
• Redefining what a book is. In November 2007, Amazon introduced the first digital Kindle with the vision of offering every book, ever written, in any language, all available within sixty seconds. For the first time since Gutenberg invented the printing press in the mid-fifteenth century, there was no need for a book to require paper and ink!
• Reinventing the traditional fulfillment center. This is where goods are picked, packed, and shipped. Many of Amazon’s seventy fulfillment centers utilize highly sophisticated robotics that speed up the process and reduce human error. “We like to think of it as a symphony of software, machine learning, computer algorithms, and people,” Amazon spokeswoman Kelly Cheeseman told MIT Technology Review. “And the people are such an important component; the technology wouldn’t mean anything if you didn’t have great employees that help interact and engage with it.” Very true!2
• New product packaging. For decades, consumer products have been packaged in much the same way, and often in those ubiquitous “clamshell” clear plastic containers. Amazon saw this as a customer pain point. Their response has been “Frustration-Free Packaging,” designed with the customer in mind, making it easier to liberate products from their packages while also reducing waste. The innovation started in 2008 by targeting just nineteen of the most annoying clamshell-packed products. Since then, Frustration-Free Packaging has grown to include more than 750,000 products, and the company reports that customers no longer have “wrap rage.” As of December 2017, Amazon’s sustainable packaging innovations have eliminated 215,000 tons of packaging material and avoided 360 million shipping boxes.3
• Fast, free shipping. In February 2005, Amazon launched Amazon Prime, the express-shipping membership program covering about a million products. It was a big gamble: in its first year, the company lost many millions of dollars in shipping revenue. But their analysis told them that if they achieved scale, they would be able to significantly lower the cost of fast shipping. Today it’s much more than free two-day shipping. Tens of millions of Prime members (Amazon won’t give an exact number) enjoy fast, free unlimited shipping on more than thirty million items; unlimited streaming of tens of thousands of movies, TV episodes, and popular music; free photo storage in Amazon Cloud Drive with Amazon Photos; and one free pre-released book a month with Kindle First.
• Sustainable energy. Amazon’s newest buildings in Seattle will be heated through recycled heat—an innovation made possible by a “district energy” system that works by capturing heat generated at a neighboring non-Amazon data center and recycling that heat through underground water pipes instead of venting it into the atmosphere. Amazon was the largest corporate purchaser of renewable energy in 2016, with wind and solar farms that will produce 3.6 million megawatts of power annually.
• Cloud-based IT services. To track its half a billion products for sale (and that’s just the main US website), Amazon needs huge databases, which it builds to be bigger than necessary. Amazon Web Services turned the company’s excess and underutilized computing resources into a source of income. For businesses paying for the service, AWS opened the door to scalable, on-demand, metered services. The service turned information technology from a capital expense to an operational expense. Not only did this have a profound impact on cash flow, it also changed everything from expense management to tax structure because capital expenses must be amortized over years, where operations can be deducted in the year incurred.
• Inventions. As of this writing, according to Justia.com, Amazon holds 7,406 patents for new inventions. (Remember, Amazon is supposed to be a retailer of consumer goods, not a Silicon Valley high-tech company!) For example, on March 13, 2018, the company was granted a patent for an “airlift package protection airbag,” designed to protect a package (one item or a number of items) that is dropped from within a predetermined height range by an unmanned aerial vehicle (UAV). This means the Amazon drone will be able to drop your item on your patio without having to land, which uses too much energy.4
There are many more areas in which Amazon, in its quest to deliver what you want and when you want it, has built a culture of sustained commitment to innovation. Many of these innovations are invisible to you, the consumer. You never see them, but you see their effect, which is what really matters.
THE SIX COMMITMENTS
No, it’s not the name of a gospel singing group. The Six Commitments represent the range of investments you and your company need to make to build a strong and durable culture of innovation:
1. Time
The most common justification offered by leaders who aren’t pursuing an Innovation Mandate is this: “We’d love to innovate, but we just don’t have the time. We work full days around here, and it’s all we can do to keep up! Nobody has a spare minute to engage in frivolous experiments.”
This type of thinking is very shortsighted.
Why? Because the time you and your people spend on innovation—in whatever form it takes—represents an investment in your future.
Think of it this way. If your roof were leaking, and you knew it was nearing the end of its service life, would you ignore it or make the investment to replace it? Of course you’d make the investment. It would be a no-brainer.
Likewise, if the current ideas and processes on which your business were based were nearing the end of their usefulness, would you ignore the warning signs or make the investment in new ideas and processes?
Some leaders say, “We don’t need new ideas. We run our business on rock-solid, time-honored values that never go out of date!”
We can all agree with the second sentence, and be glad they hold fast to basic values including honesty, hard work, and fair play. But the tools they use will go out of date, just like the tools that Amazon once used went out of date and had to be upgraded.
Your supply chain, your marketing, your human resources policies, your IT structure—all are just tools that eventually wear out and need to be superseded by new ones.
At least that’s how it works among your competitors. It should work the same way in your business. You do replace worn-out tools with new ones, don’t you?
And, as Aaron Martin, senior vice president of strategy and innovation at Providence Health & Services, said, “If you disrupt your own business through innovation, you have a say in the future. If you don’t, you’re basically leaving it to others to dictate the terms of how the future will go.”5
In many companies, the necessity for renewal and the development of new ideas is so important that they set aside actual mandated time for innovation.
In 1948, 3M launched its 15 percent program, where 15 percent of employees’ time was dedicated to innovation. The Post-it Note was invented during 15 percent time. Organizations such as Google and Hewlett-Packard have both replicated this approach. Gmail, Google Earth, and AdSense were conceived during Google’s 20 percent time, which the internet giant has since redefined to be more of a general concept than a hard-and-fast expectation of time spent.
At Kayak, the online travel site, executives set aside a week for the pursuit of the innovative. Primarily to develop team building, Kayak’s hack week has produced new ideas that benefit customers, including direct booking, which allows travelers to conduct all their travel business—flights, hotels, and cars—without leaving the website.6
With products like Jira, Confluence, Bitbucket, and Hipchat, collaboration software provider Atlassian helps all sorts of teams plan, code, and track projects. During a quarterly event called ShipIt, Atlassian employees have twenty-four hours to build a solution for a product, the company, or the greater world. Then they create three-minute lightning talks to present their projects to the entire company.7
Professional networking site LinkedIn launched “[in]cubator,” a program that allows any company employee with an idea to organize a team and pitch their project to executive staff once a quarter. [in]cubator is a more-evolved version of the company’s “hackdays,” in which employees worked on various creative projects one Friday a month. “We see [in]cubator projects as small investments that have the potential to become big wins for the company,” wrote the company on its official blog.8
Time is a precious commodity. You can use it to just “tread water” and stay afloat, or with a little bit of planning you can invest your time in new ideas that will pay off in the future.
2. Finances
The number two excuse offered by busy executives is, “We don’t have the spare cash to put into a fancy innovation program.”
But remember this: in your company, right now, the sparks of innovation are flashing again and again! People are naturally curious and seek to improve their work. At the very minimum, you need to establish your Innovation Mandate, capture these sparks, and develop them. Don’t stamp them out! They don’t always cost money—and they very often save money.
Of course, the most robust cultures of innovation include a financial commitment at some level. Some corporations make huge investments in innovation. In 2015, PricewaterhouseCoopers conducted a global survey of corporate innovation spending, and compiled a list of the top innovation investors. German auto manufacturer Volkswagen appeared in first place, spending a whopping $15.3 billion on research projects, which equaled almost 6 percent of the company’s annual revenue of $269.1 billion. Volkswagen says its spending results from being a “highly competitive and innovative car manufacturer which must fulfill a whole host of environmental and safety standards.” Much of that spending has gone into hybrid vehicles and adding new technology, including semi-autonomous features to some of its twelve brands.
Other big spenders in R&D included Samsung ($14.1 billion), Intel ($11.5 billion), Microsoft ($11.4 billion), Roche, Google, Amazon, Toyota, Novartis, and Johnson & Johnson.9
As Fortune magazine reported, Samsung breaks R&D investment into three business areas, each with their own time horizon:
1. Business unit development teams have a one- to two-year development outlook.
2. Research institutes have a three- to five-year development outlook.
3. The Samsung Advanced Institute of Technology works on projects with a further line of sight.10
AstraZeneca, a British-Swedish multinational pharmaceutical and bio-pharmaceutical company, pumped 21.5 percent of its annual revenue into R&D in 2015—the highest proportion of designated (“ring-fenced”) investment of any of the top twenty.
At Google, the company employs about 18,600 people in research and development, and most of its R&D costs go into staffing and personnel support. According to Google’s annual report, “Our product development philosophy is to launch innovative products early and often, and then iterate rapidly to make those products even better.”11
Let’s be honest: most business leaders aren’t heading up a company the size of Volkswagen or Google. They don’t have that kind of budget for anything, much less innovation.
That’s okay.
It’s not how much you spend to support innovation in your organization, it’s how you spend it that counts.
PwC’s 2017 “Innovation Benchmark Report,” which surveyed executives in more than 1,200 companies, found that nearly all the participating companies believed their innovation efforts had at least a moderately positive impact on both top-line and bottom-line revenue growth, and roughly half the companies reported their investment had a “great” impact on driving their growth, with an equally significant impact on cost management. These findings showed little correlation to the dollar amount of the commitment. In fact, PwC reported, “Over the past dozen years, our annual Global Innovation 1000 study has found no statistical relationship between dollars spent on innovation and financial performance, suggesting that the way you spend your innovation dollars is more important than how many of those dollars you spend.”12
That’s right. While investment in innovation is critical, merely throwing money at the problem is not the solution. It’s like anything else in life: you can spend your money recklessly and get fleeced, or you can make smart investments and reap the rewards.
Stuart Blyth, CEO at Rubix Digital Solutions, told Brainstorm magazine, “Investing in innovation is not a line item on a company’s budget, it’s an investment of effort and money into the mindset and culture of the company. The change needs to be driven from the top, with chosen champions within the organization to help with change.”13
3. Acumen
We live in a time of accelerating change where innovation is becoming the norm—or at least it is among your competitors, and hopefully in your company too.
Change means new things enter your world and impact your business—new technologies, processes, customer expectations, external threats.
To master new challenges requires lifelong learning, which leads to acumen: the ability to make good judgments and quick decisions.
In any organization, there can be no Innovation Mandate without continuous learning. This means both being passively open to new ideas and actively seeking to acquire new knowledge.
Your company’s openness to receiving new ideas is a product of the leadership you provide from the top and the example you set. That’s a good first step.
The next step is to be proactive.
Your company’s active commitment to learning requires a deliberate allocation of resources and the growth of a culture that sanctions and encourages intellectual advancement.
INVEST IN LEARNING
An increasing number of companies subsidize and encourage their employees to pursue formal education.
Health Care Service Corporation (HCSC) is the largest member-owned health insurance company in the United States. Management at HCSC encourages employees of all levels to innovate, contribute ideas, and learn. To back up this commitment, the company offers a variety of programs for team members who want to continue their education. “We provide school reimbursement for undergraduate, master’s degrees, and certifications,” said Lisa DeWard, senior portfolio delivery consultant, “all while encouraging employees to attend seminars and conferences.” As the company says, “We are committed to discovering new ideas, finding a better way, and asking the right questions. Ongoing learning and development opportunities help foster this kind of creative thought.”14
Smaller companies do it too. As reported by Fortune, TD Industries, a construction and real estate company based in Dallas, Texas, spent $1,020,150 on tuition and training reimbursements in 2015, with 92 percent of its 2,300 employees taking advantage of the benefit. Because it’s a construction company, more of its employees enroll in classes for technical training—often at night—versus courses for college credit. It considers any cost associated with a class as “tuition.”15
The website of the company says, “At TD Industries we support a culture of inclusion, a culture of ownership. We accomplish this through a Servant Leadership philosophy that puts others first.”16
For this and many other aspects of its innovative company culture, it’s no surprise that TD Industries has been listed among so many ranks, including:
• 2018 Fortune 100 Best Companies to Work For (ranked 73)
• 2017 People Companies That Care (ranked 11)
• 2017 Best Workplaces in Texas (ranked 12)
• 2017 Fortune 100 Best Companies to Work For (ranked 44)
• 2016 Best Workplaces for Latinos (ranked 9)
• 2016 Best Workplaces to Retire From (ranked 5)
A recent survey by EdAssist, a company that advises employers on their tuition assistance programs, revealed that if asked to choose between similar jobs, nearly 60 percent of respondents would choose the job with a professional development program over one with regular pay raises.17
There are many ways you can actively support lifelong learning in your company. By doing so, you’ll keep the spark of innovation burning bright in every corner of your organization while making the smart business decisions that bring in profits.
4. Spirit
To create and sustain a culture where the spark of innovation flourishes, we’ve seen that you need to allocate time, provide financial support, and make the appropriate intellectual commitment.
You also need to have the right spirit.
This means you need a culture in which work is fun and the unknown is exciting.
You do not want a culture in which work is drudgery and the unknown is scary.
Employees of the file-sharing service Dropbox benefit from a collaborative environment with plenty of opportunities to grow. A favorite is Hack Week, which allows everyone to return to their roots by tinkering with code or pursuing a professional interest. This freedom makes the problem-solving process seem less intimidating—and often generates inspired solutions that make the office (and employees!) excel.18
CarMax, the largest retailer of used cars in the United States, has always sought to transform how vehicles are bought and sold in America by making the experience transparent and stress free. As chief information officer Shamim Mohammad told MIT Sloan Management Review, how product teams are managed is key to keeping the spark of innovation alive. “The one thing that every person on the team must have is curiosity,” he said. “We’re encouraging these agile product teams to learn, explore, and discover how to best deliver against business objectives and exceed customer expectations. In this type of environment, it’s important to develop a culture that’s not afraid of failure and is motivated by constant learning to enhance the next iteration of the product.”19
The Innovation Mandate welcomes failures because you learn from them. And it’s often okay to not have a clear goal. As Mohammad remarked, “When we started this journey, we didn’t have an exact blueprint for how the culture was going to evolve. But like our agile product teams, we are constantly evaluating how our teams can become more effective and make better decisions.”
Here are the four keys to creating a spirit of innovation that gets results:
1. Keep the effort focused. Too many corporate visions and missions sound the same: “Become the number one provider of blah, blah, blah.” These generic, broad-based goals might seem useful, but they do nothing to spark innovation. Perhaps the worst thing a company can do is to proclaim it wants innovation without giving any direction. That’s when the focus gets lost and teams waste time and energy. Instead, be crystal clear about how you want to improve the lives of your customers and solve their problem.
2. Give your people the gift of time. You can’t expect your employees to innovate and come up with new ideas if they’re overloaded with everyday tasks. Either build new ideas into the fabric of everyday work—such as allowing employees to brainstorm as a regular part of a project—or give them chunks of time where they’re free to try new ideas.
3. Applaud failure. As the American author and pastor John C. Maxwell said, “The difference between average people and achieving people is their perception of and response to failure.”20 As a leader, how do you respond to failure? Do you say, “That’s terrible,” or do you say, “Good try! What have we learned? What’s the next step?” Remember, we’re talking not about plain old stupidity, but about an honest failure made while striving to solve a problem. (See point #1 above.)
4. Recognize success. Team members need to know that their successes are appreciated and could make a difference. There’s no faster way to kill the spirit of innovation than to take an employee’s idea or suggestion and then fail to say “thank you.”
Studies have shown that monetary rewards are not the best way to encourage innovation. It’s not healthy when the motivation to innovate is the desire for a cash prize.
In their report “The Dirty Laundry of Employee Award Programs: Evidence from the Field,” researchers Timothy Gubler, Ian Larkin, and Lamar Pierce found that reward systems can often backfire. As Larkin told the Harvard Business School newsletter, “When I talk to companies about award programs, I find myself telling them, ‘Don’t put in that $500 or the trip to the Bahamas.’ It sounds like a nice thing to put in, but it also changes the psychological mindset people have.”
It’s more effective to make an emotional, human connection with the person you want to recognize. Publicly thank them in front of their peers. “You can’t put a price on that,” said Larkin. “The recognition of hearing you did a good job and that others are hearing about it is worth more than money.”21
5. Resources
It’s one thing to say you support and value innovation.
To make it meaningful, you need to provide the resources to make it possible. You can’t make a return if there’s no investment of resources. This is true of every business venture, including innovation.
We’ve talked about two important resources: money and time.
There are others that are just as important.
One of the most important resources is the physical stuff you need to create something new. Every company has equipment it uses—computers, tools, product demos, scraps of failed projects. This equipment is likely being used on a daily basis for core business purposes. In organizations that discourage innovation, the everyday gear is “hands off” unless used for a current business activity. If an employee is trying something new, they are often discouraged from using workplace equipment or may not have access to it at all. In contrast, at organizations committed to innovation at every level, leaders ensure that employees feel comfortable using company equipment to try new ideas.
It’s often said that a designated “innovation lab” or room can be counterproductive, because leaders too often set up such a space and then let it wither on the vine. An innovation lab can be the kind of “feel good” project that looks pleasing on the annual report but produces nothing. Recent years have seen Nordstrom, Microsoft, Disney, Target, Coca-Cola, British Airways, and The New York Times Company either close or dramatically downsize their innovation labs. Analysts say that 90 percent of innovation labs are failing.22
But if such a space is created with a serious intent, funded and equipped, and actually used by its employees, then an innovation lab can be a good thing. A rare innovation lab success story is Daimler’s Lab1886, established in 2007 as Daimler Business Innovation. It works because the company imposes defined milestones, and transparent processes structure the work in the incubator. If an idea does not stand the defined stress test—for example, if the project isn’t scalable or won’t help the company fulfill its mission—it is discarded. As Daimler said on its website, “Innovation is not by chance. Innovation follows a plan. Driven by the passion to make the unimaginable possible, people experiment with the known and put it together in new ways. To this end, Lab1886 has its own philosophy divided into three consecutive phases: ideation, incubation, commercialization.”23
6. Imagination
Imagination is the realm of the mind where you see things that do not yet exist in this world, but which one day might.
It’s the critical first step in innovation.
It’s a particularly human trait that allows us to see a problem, project the image into the future, and see the solution. It allows us to take seemingly unrelated ideas and discover how they fit together in unexpected ways. With imagination, we can ask, “What if?” and then visualize a solution.
What if we took ordinary mobile phones and created a money transfer system that anyone could use?
What if we used satellites to provide precise global positioning services for virtually any object on Earth?
What if we leveraged the power of the internet to let people work at home rather than coming to a central office?
What if we got rid of clunky bolt-on solar roof panels and made the entire roof of a house a solar panel?
You’ll note that in each of these examples—and countless more—the innovative process requires seeing a problem (such as, billions of people in developing nations don’t have access to banks) and then imagining a solution (most of these same bankless people have mobile phones). With the solution having been imagined (somehow we need to connect mobile phones to a money transfer system), all that remains is to figure out how to make it real. In the case of mobile money transfers, in simple terms you “top up” your mobile phone account with credit and then, via text message, transfer it to someone else’s account. It seems so simple now that it’s real!
Imagination works on a big scale. It isn’t particularly relevant in incremental changes. Typical verbal challenge statements like, “What other colors should we offer in our line of sneakers?” or “How might we improve communications across divisions of our global company?” do not inspire the imagination. In fact, they tend to box it in. You get colleagues and others to use their imaginations by stimulating them while eliminating preconceptions. You can even simply ask them to imagine. For example, instead of asking, “How can we improve the delivery of our product to our customers?” ask, “Imagine our product arrived at the customer’s door exactly on time, every time, regardless of the weather or the day of the week. What would such a delivery system look like? Describe it, or sketch it out.” Now you’re giving the person a blank canvas free of preconceptions. The imagined solution may be impractical, or it may be a fresh new idea that could disrupt the marketplace.
IMAGINATION GOES BEYOND DATA TO DISRUPTIVE INNOVATION
Businesses like to depend on data to tell them what customers want. Intuition is universally decried. This is legitimate—up to a point. Data is useful on a limited scale, but it can only tell you so much.
How many products have flopped despite reams of market research? How many political elections have defied the data, with the underdog coming out the winner? Many! At the end of the day, customers make decisions based on emotion, not data. They buy what they like, even if they have never seen it before.
Customers often don’t consciously know what their real problems are. They know where the immediate pain is, but this is often just a symptom of the real, much deeper concern. It takes time, patience, and imagination to uncover what really motivates them.
Getting to the heart of a customer issue means looking at all the data and then going one step beyond to experience what that problem is like for them—touching, smelling, and tasting what their environment is like and how they operate within it.
In our era, Steve Jobs was the master of imagining what the customer wanted even if the customer wasn’t consciously aware of it or could articulate it. As he said, “It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”24
As Mario D’Amico, senior VP of marketing at Cirque du Soleil, wrote in a 2012 theoretical case study published in the Harvard Business Review, “How can people tell you what they want if they haven’t seen it before? If we ask them what they want, we’ll end up doing Swan Lake every year!”25
If you want to make incremental improvements to an existing product, then by all means use customer surveys and data.
If you want to be disruptive and innovate on a grand scale, forget the data and use your imagination!
A sustained and serious commitment to Time + Financing + Learning + Spirit + Resources + Imagination = Innovation. If you and your organization can make a commitment to each of these foundations of innovation and stick to them for the long term, you’ll stay ahead of the innovation curve.
NEED TO BETA TEST AN APP? GET THE TESTERS DRUNK!
Recently the New Yorker profiled Appcues, a Boston-based startup that tests apps to determine how easily people can use them. In a true spark of innovation, the company realized that if you were going to test apps on the target demographic—urbanites age twenty to forty—then you should do it under real-life battle conditions, when the user is harried, or confused, or . . . drunk! Jonathan Kim, the company’s twenty-nine-year-old CEO, said, “We asked ourselves, ‘How cool would it be to throw a party and let people test apps?’”
The company had done a few drunk app tests in its hometown of Boston. “This usability testing,” said the company’s website, “will help product teams evaluate their software by watching actual users interact with it. In this setting, attendees will interact with beta versions of a bunch of different products and talk it through with its creators.”
On a March evening in 2018, the company rented a space in San Francisco for a West Coast Drunk User Testing. Two hundred and eighty people showed up, presumably by Uber or trolley car. They were mostly male tech workers, and each paid six bucks for the pleasure of drinking all the beer and wine they wanted while testing various apps.
“The idea of intoxicating a large group of people is good to get a lot of data that you might not get otherwise,” a software engineer named Amy Loftus told New Yorker writer Blaise Zerega.26
Innovation takes many forms—including finding new ways to beta test a product!