THE INNOVATION OPERATING SYSTEM (IOS)
We use the term “innovation operating system” for a reason.
Your IOS is very similar to your computer operating system, in that the goal of the system is to run the machine. An operating system or OS is a set of programs on the hard drive that enables the computer hardware to communicate and operate with the computer software. It manages the hardware devices in your computer—things like the processor, memory, disk storage, keyboard, mouse, monitor, USB bus, and network adapter. Without a computer operating system, a computer and software program would be useless. A good computer operating system does its work invisibly, efficiently, and profitably. It’s durable and requires only regular, anticipated upgrades to stay at peak performance.
Computer operating systems have names like Windows, Linux, Android, and Mac OS.
In addition to running the machine, computer operating systems are augmented by a range of specialized software packages designed to perform specific tasks. These software applications include things like word processing, spreadsheets, presentation software, and the like. Examples include Microsoft Office, Google Chrome, and Adobe Photoshop.
These are all commercial, mass-produced solutions. They are tried and true.
But your company is unique. An off-the-shelf computer software system isn’t going to align with what you need. You need solutions that support your individual requirements.
That’s why organizations are served by software vendors such as Intellectsoft, MojoTech, DataArt, and FrogSlayer, who custom-craft software systems to meet their needs. The results are hybrid systems that have a basic architecture that’s common to all, combined with features that are unique to the customer.
Your innovation operating system will be no different. It will have a basic structure that’s similar to others in its class while at the same time having features that are unique to your organization.
We call it structured customization. The key to a successful innovation program is that you need to follow a plan that ensures you avoid the common mistakes and pitfalls of enterprise innovation, while at the same time customizing it to fit the unique and special goals, needs, opportunities, and culture of your enterprise.
CREATE YOUR IOS PROGRAMMING CODE IN SIX STEPS
All operating systems are constructed using code. The programming code is basically the rules that apply to the way in which the operating system controls the machine. All code is created using authoring platforms or languages.
Rather than diving too deeply into the analogy and going into all of the complexity of the language, I’m going to describe the building blocks of your IOS code, so that you can create an effective and efficient innovation infrastructure that will deliver real results to your organization.
You’ll note that some of these steps dovetail with the work you’ve already done while formulating your innovation mission. That’s fine—some overlap is okay. For example, the first step is to answer the question, “Why?” You may have figured this out and put it into your innovation mission. Good! Then you’ll be able to breeze through it to the next step.
Let’s get started.
1. The Why
If you’ve ever been around children, you probably know the story of the child who, to every answer you give, responds by asking, “Why?”
“I want you to come inside,” you say.
“Why?”
“Because it’s raining out.”
“Why?”
“Because the clouds are full of water, and they can’t hold it anymore.”
“Why?”
“Because cool air can’t hold as much water as warm air.”
“Why?”
And so on. You get the idea. If you both keep playing the game, eventually you’ll work your way back to the Big Bang theory.
It’s funny, but this shows why this question is both important and challenging.
It’s important because it goes to the very heart of how the spark of innovation is vital to your organization. It’s challenging because it takes mental effort to answer.
The “why” is critical because it drives stakeholder engagement, establishes measurements for success, and controls the ability to target and navigate through the entire process of innovation. Asking yourself why innovation is critical to your organization and what you intend to do with it is truly the genesis of all innovation initiatives.
Perhaps the somewhat slippery and daunting nature of the question is why many executives rush to create an innovation initiative before they have asked themselves why they’re doing it in the first place. But this is putting the cart before the horse.
If you’re having a difficult time answering the question “Why innovate?” then consider this quote from Edith Widder, American oceanographer, marine biologist, and the co-founder, CEO, and senior scientist at the Ocean Research & Conservation Association: “Exploration is the engine that drives innovation. Innovation drives economic growth.”1
In her case, she’s talking about literal exploration, as in getting in a submarine and going to the deepest part of the ocean to search for giant squids. Your exploration may be physical, like hers, or it may take the form of searching for new ideas, processes, and business solutions.
Just as importantly, Edith Widder stated the second half of the equation: “Innovation drives economic growth.” This is so fundamental you can print it on a big banner and hang it on your wall.
Exploring for new ideas drives innovation, which drives economic growth. This is absolutely true for any organization, including yours.
But to get back to how your organization answers the question. Too often, “innovation meetings” or “round tables” are empty vessels, but if you’re sincere about it, then hosting an open discussion with stakeholders is a good way to start. Get people talking about it. Make innovation an ordinary topic of discussion on the same level as a sales report or new product rollout project. Remove the mystery and unfamiliarity. Make innovation part of the everyday fabric of your organization.
By the way, you don’t need just one “why.” In fact, you may have several. Here are some reasons why your organization—and your people—should embrace innovation. You can probably think of more!
1. Technology is constantly advancing, and our products need to keep pace.
2. Our customers have other choices from our competitors. We want to stay number one in the minds of our customers and keep them coming to us.
3. If we innovate, we can charge more for our products, and make more money.
4. We want to hire the best talent. Smart, aggressive people don’t like to sit around and do the same things year after year. They want to be challenged.
5. We’re human beings, and we like to explore. Exploration leads to innovation, which leads to economic growth.
How many more reasons can you think of?
2. The Vision
From your answers to the question of “Why innovate?” comes your vision for innovation. It should be written out, like an organizational mission or vision statement that focuses on innovation.
And to answer the question, “Why should we have a vision for innovation?” here are three benefits of having a vision that’s clear and concise:
1. Engagement. With a clear innovation vision, stakeholders will share a common goal and have a sense of being on a journey together. They will be less likely to waste time on nonproductive activities. They’ll be more willing to accept the difficulties, challenges, and changes that the innovation journey can entail.
2. Responsibility. The innovation vision guides the innovation systems, which in turn manage the innovative pipeline and its various initiatives. With a vision and systems in place, staff can be empowered and given more leeway in their work. Because they know the goals and direction toward which they are working, they can be trusted to steer their own ship and determine the best way of getting there.
3. Creativity. If people know there are unsolved challenges lying ahead, they’ll be more creative and willing to contribute more ideas. Because they’ve bought into the journey, they’ll be more motivated to find ways to go over and around the obstacles in their paths.
Here’s what Satya Nadella wrote in 2014, a few months after he took over as CEO of Microsoft: “The day I took on my new role I said that our industry does not respect tradition—it only respects innovation. I also said that in order to accelerate our innovation, we must rediscover our soul—our unique core.”2
But lest you think Nadella was concerned only with big-picture, philosophical matters, later in his memo he got very much down to earth: “We help people get stuff done. Stuff like term papers, recipes, and budgets. Stuff like chatting with friends and family across the world. Stuff like painting, writing poetry, and expressing ideas. Stuff like running a Formula 1 racing team or keeping an entire city running. Stuff like building a game with a spark of your imagination and remixing it with the world. And stuff like helping build a vaccine for HIV, and giving a voice to the voiceless.”
As with a strategic plan, the best innovation operating systems have the vision of innovation at the very top. This is important because a vision, being both intellectual and emotional, should be easy to communicate. You should be thoughtful in the creation of your vision statement, as this is something you will use to communicate to both internal- and external-facing customers. Just as you did when you asked the question “why?” don’t go it alone! Make the process of forming your innovation vision open and transparent. Solicit stakeholder input. Generate a series of drafts, tear them up, and write some more.
The innovation vision must be powerful and transformative, and deserve the full support of every stakeholder. It must be fully embraced and championed by leadership. As former General Electric CEO Jack Welch said, “Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.”3
Remember that a vision statement isn’t the same thing as a mission statement. While a mission statement describes what a company wants to do now, a vision statement outlines what a company wants to be in the future. It can also describe what kind of world it wants to help create for the future.
That being said, some companies blur the distinction. By whatever name you call it, the important thing is to create it and communicate it!
Here are a few examples. I’ve added the emphasis:
“Bring inspiration and innovation to every athlete* in the world. (*If you have a body, you are an athlete.)”—Nike
“To offer travelers a reliable, innovative, and fun airline to travel in Central America.”—NatureAir
“Our mission is to make Target your preferred shopping destination in all channels by delivering outstanding value, continuous innovation, and exceptional guest experiences by consistently fulfilling our Expect More. Pay Less. Brand Promise.”—Target
“We believe that we are on the face of the earth to make great products and that’s not changing. We are constantly focusing on innovating. We believe in the simple not the complex. . . . We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot.”—Apple Computer
“Digital currency will bring about more innovation, efficiency, and equality of opportunity in the world by creating an open financial system.”—Coinbase
“At Philips, we strive to make the world healthier and more sustainable through innovation. Our goal is to improve the lives of 3 billion people a year by 2025. We improve the quality of people’s lives through technology-enabled meaningful innovations.” – Philips Research
“Offering all women and men worldwide the best of cosmetics innovation in terms of quality, efficacy, and safety.”—L’Oreal
“Using our portfolio of brands to differentiate our content, services, and consumer products, we seek to develop the most creative, innovative, and profitable entertainment experiences and related products in the world.”—Disney Corporation
“To be the most innovative enterprise in the world.”—3M4
Because innovation is unpredictable, don’t box yourself out of opportunities by being too specific with your vision statement. Organizations should, however, be big, brave, and bold in their vision statement and their innovation initiative alike.
Also, please note that while you typically create your innovation vision early in the process, you can do it anytime. Formulating a vision often takes time, so you may start the process and then continue it while you work through the other steps. And, your organizational mission and vision statements should be reviewed once every few years to ensure they’re still exactly what you want and are relevant. It’s not uncommon for organizations to rewrite or revise their mission and vision statements as conditions change.
3. The Definition
Once you’ve determined why you’re creating your Innovation Mandate and have a vision for your outcome or for the world as you hope to make it, you will then be well suited to begin the process of defining what it is and how it moves you toward your organizational goal. The definition should be understandable, relevant to your organization, and, most importantly, measurable and attainable.
Here’s where a gap analysis is very useful.
A gap analysis involves the comparison of actual performance with potential or desired performance. It involves determining, documenting, and improving the difference between business requirements and current capabilities. It’s a formal study of what a business is doing currently and where it wants to go in the future.
Please note that the capitalized “GAP analysis” has also been used as a means of classifying how well a product or solution meets a targeted need or set of requirements. In this case, the acronym GAP can be used as a ranking of “good,” “average,” or “poor.”
In everyday business, a gap analysis can be used to define what it will take to meet a goal. Here’s a simple example:
1. Identify the status quo: We’re selling 5,000 units per month at a net profit of $1 million.
2. Identify the target: We want to net $1.5 million within two years.
3. How can we reach the target?
A. Cut our expenses so we can sell 5,000 units but net $1.5 million.
B. Sell 7,500 units of the same product at the same price.
C. Raise the price per unit by selling an innovative model with more features.
D. A combination of A, B, and C.
4. Challenges.
A. We believe our existing geographical market is saturated, and we’re not ready to expand into a new market.
B. Our factory is at 100 percent capacity and we can’t expand before two years.
5. Strategy: We will seek to bridge the gap by innovating and making our product a better value so that customers will pay more for it.
You can define what you want to get from innovation and set appropriate and attainable goals. Here are just a few examples:
• Mandate that a certain percentage of annual revenues must come from new products. This is often called the “innovation sales rate” (ISR).
• Track how many ideas per month you’re getting from all of your employees.
• Measure the success of individual innovation projects (from concept to customer) and overall platform or new business development programs.
• Calculate the risk-adjusted net present value of the innovation pipeline and the return on investment in that pipeline. I’ll talk about the innovation pipeline in the pages ahead.
Remember that inherent in innovation is exploring the unknown, and that brings with it an expected rate of failure. Accordingly, it’s important to measure innovation holistically. Each individual effort cannot and should not be measured at the innovation state. Beware of measuring only what’s easy to measure instead of what’s important, and avoid measuring too many things.
4. The Readiness Assessment
Innovation is a people-powered process. Innovation is literally the process of gaining insights and ideas and putting them into action; and as of today, robots and computers aren’t good at this. People must do it, and they need to be ready and willing.
Complete your assessment to determine how you will reach out to stakeholders, partners, vendors, customers, and in some cases even competitors, to get insights that you can transmute into organizational and customer value.
A gap analysis isn’t just for the operational stuff. It can also be useful when looking at the readiness of your leaders and employees.
For example, in 2015, the Korn Ferry Institute conducted a side-by-side comparison of a group of logistics executives from average companies and those from Forbes magazine’s “The World’s 100 Most Innovative Companies.” The study was based on the premise that if innovation were crucial to successful strategies across a company’s supply chain, then logistics sector leaders needed to possess the personal qualities that would enable the spark of innovation to flourish.
The study found that when compared to their MIC peers, the group of average logistics executives “typically displayed lower levels of learning agility and cultural dexterity—two traits highly predictive of success and engagement, especially in senior leadership roles.”
Learning agility is defined as the willingness and ability to learn from experience, and to then apply this knowledge to succeed under new or first-time conditions.
Cultural dexterity is defined as a professional’s ability to work effectively with individuals from various cultural backgrounds.
Both are important for sustained innovation.
The Institute reported the average logistics leaders excelled in only one among eleven innovation indicators—independence. Meanwhile, executives in the Forbes MIC received top scores of ten in seven areas: cultural dexterity, learning agility, emotional intelligence, self, power, challenge, and independence, and scored nine in thought, which has a specific innovation component.
Overall, the Forbes MIC executives outperformed the average logistics leaders by nearly 50 percent.5
This is not surprising!
The embrace of innovation must be well thought out and sustained.
Here’s some tough love: stocking your employee lounge with Ping-Pong tables, installing whiteboards, hosting quarterly hackathons, and proclaiming casual Fridays isn’t the way to ensure innovation readiness! Leaders often seize upon these quick-fix tactics and convince themselves they are ready for innovation when, in fact, the critical ingredients of innovation are missing.
Instead, survey your managers and employees and ask them if they can define the problem they’re solving for the customer. You don’t want them to describe the current solution. You don’t want them to say, “We make a great product.” That means they’re only thinking about today. If they’re focused on the problem, they’ll be thinking about how to create better solutions for the future.
When your people are ready for the spark of innovation, they’ll capture it and harness its tremendous energy.
5. The Team Architecture
Your Innovation Mandate needs to be both well defined and flexible.
Strong but able to bend.
Identifiable but shape shifting.
And while it needs to be democratic and woven into the fabric of your organization at every level, like any other operational function it requires guidance and oversight.
While everyone in your organization should participate in innovation, you don’t need an organization full of innovation directors. It’s no different from, say, quality control. While everyone in an organization should support and pursue the highest standards of quality control, you don’t want them all to be quality-control officers. You need people who can oversee and evaluate your innovation program, just like any other operational area of the organization.
If your organization is large, you may have multiple innovation teams. Most teams will appoint a team leader, who is responsible for establishing process, including how to communicate during brainstorms and meetings. That person can also help guide to the top of the organization the ideas and initiatives introduced in those meetings.
At the very least, you need an innovation champion. In a small company it could be the CEO, or in a larger organization there might be several. The innovation champion has the power to allocate resources within a set budget and ensure that the innovation pipeline is full.
CONTINUOUS IMPROVEMENT, BIG BREAKTHROUGHS . . . OR BOTH?
Innovation generally manifests itself in two ways:
1. Continuous improvement. This is the Japanese kaizen. Here, you’re looking for a steady stream of small ideas from frontline workers in every department, which, when implemented, will deliver an incremental improvement to a process or product. To create and maintain this kind of approach, the only significant investment you need to make is in your people. They need to know they’re expected to offer ideas, they need to know how to do it, and there needs to be a person or people who receive the ideas and process them.
Hackathons are fine, but only as part of a long-term strategic embrace of innovation. If a hackathon is just a one-shot event, the end result will be worse than doing nothing because the employees will feel used.
2. The big breakthrough. This is what we see in structured innovation programs that have a specific project goal, such as to find a new drug to combat a particular disease. Big breakthroughs require line-item funding, staffing, and often a capital investment in space and equipment. The company looks for a return on investment, not necessarily from each specific project but from the innovation effort as a whole.
Many companies use a hybrid approach, and look for both continuous improvement as well as big breakthroughs.
YOUR PEOPLE ARE THE KEY
No matter how you organize your innovation effort, you must have people who are responsible for the entire innovation process.
Here are the key attributes of people you need on your innovation team:
• You need an innovation champion on the team who has access to the “go” button. This is absolutely key. If new ideas can’t be propelled across the finish line, team members will quickly figure out they’re nothing but empty window dressing.
• In architecting your innovation team, it’s incredibly important that you leverage a thoughtful group of people who have the ability to provide real value in the assessment and development of innovations. You need subject experts in the relevant areas—marketing, design, production, human resources, finance.
• This is not about putting together a group of sycophants; in fact, you want a team that will likely get a bit scrappy given their wide range of views on all things innovation. Bring in a mix of veterans with deep experience of the core business but who may resist seeing new possibilities, along with younger “creatives” who are wired to generate crazy ideas that can’t be implemented. Make them work together to recognize the spark and capture its full energy.
• The team members should be results-oriented, fast-moving, smart, and perhaps most importantly willing to take some big risks. You don’t want people who are comfortable simply punching the clock day after day.
• When working on a project basis, an effective group is comprised of individuals from different departments within the company. If the team’s goal is to develop a new product, for example, there should be representatives from research and development, design, manufacturing, marketing, sales, and finance on board.
CODING YOUR INNOVATION OPERATING SYSTEM
Now that you have a reason why you need innovation, a goal that you want to achieve, and a team that will help you get there, it’s time to build your plan—to write the operating code, so to speak.
Here’s a winning structure you can use in the creation of your innovation operating system:
1. Establish a Clear Team and/or Organizational Process
Whether for a project team or the entire organization, a clear process ensures every employee can both participate in innovation and be held accountable to the same principles. Establish a leadership structure, define the roles of each team member, outline norms for how the team should collaborate, and set individual and group goals.
The more clarity and empowerment you can give the team and overall organization, the better.
2. Allocate Sufficient Resources
Like every functional area of your organization—human resources, operations, finance, compliance, logistics, marketing, or any other—innovation needs resources that will always include time and may also include space, equipment, and information.
Don’t make innovation an also-ran. Because most team members aren’t working solely on a single innovation project, employees are often pressured by other work demands. This is where the innovation champion is particularly useful—to give employees official permission to take chances or explore new ideas.
3. Encourage and Embrace Failure
Innovation and failure go hand in hand. That’s to be expected.
Failure should mean that the team tried a new idea and learned an invaluable business lesson. For employees to believe that failure is okay, the organization needs to create a climate of “psychological safety”—a term coined by Harvard Business School professor Amy Edmondson. It’s a work environment in which people feel comfortable admitting to well-intentioned mistakes without fear of being punished. What no one wants is a climate where mistakes are made and then covered up because team members don’t want to be made to feel vulnerable.
Failure should be written into the budget. Unless a company is defined by its breakthrough products, the company’s bottom line should never wholly depend upon the success of one risky project.
4. Ensure Employee Engagement
When innovation is a team or project effort, leaders need to ensure that everyone understands and supports the organization’s commitment to innovation and that the team receives the cooperation it needs to succeed.
While in a large organization it’s neither necessary nor desirable to plug every employee into the decision-making process, the more visibility innovators can bring to their work, the more willing other stakeholders will be to help and adopt new services, processes, or tools.
Making everyone comfortable with innovation is best done through personal conversation. Leaders need to lay out the vision, take questions, and get a sense of the organization’s appetite for both incremental innovation and larger risks.
Before trying to make the big sell, innovation team members can gain a better understanding of the problems facing the organization and uncover any main points of objection they might face by meeting with other colleagues as well as the innovation champion.
Innovation is a series of concrete, definable actions. You don’t have to be born with the ability to be innovative. Because it’s a set of behaviors that can be learned, anyone is capable of doing it—that is, as long as the organization makes it a priority.
INNOVATION BY COLLABORATION: THE LINUX OPERATING SYSTEM
Speaking of operating systems, one of the most innovative computer operating systems was the product of open collaboration. It all started in 1991 with the commencement of a personal project by Finnish student Linus Torvalds to create a new free operating system kernel. He initially called it “Freax,” and he posted a public note that said, in part, “I’d like to know what features most people would want. Any suggestions are welcome, but I won’t promise I’ll implement them :-).”6
The initial governance structure of the Linux project required that all code be reviewed by Torvalds. This worked while the project was relatively small, but as the demand for Linux grew and the kernel became more and more complex, this structure simply wasn’t sustainable.
The project quickly devolved into various subsystems, each with their own maintainer overseeing a specialized niche of the kernel, such as networking or file systems. Within each of these subsystems are additional submaintainers, who oversee even more specialized components. As a reflection of the logical scaling of the project, the decentralized approach works very well.7
The development of Linux is one of the most prominent examples of free and open-source software collaboration, in which underlying source code may be used, modified, and distributed—commercially or noncommercially—by anyone under the terms of its respective licenses, such as the GNU General Public License.
Today, the Linux Foundation pursues a mission of innovation, and says, “The Linux Foundation has taken its experience and expertise supporting the Linux community to help establish, build, and sustain some of the most critical open source technologies. Its work today extends far beyond Linux, fostering innovation in every layer of the software stack.”8