The Innovation Value Chain: A Logic for Fixing

The Innovation Value Chain: A Logic for Fixing
Your Company’s Innovation Problems

By Morten T. Hansen and Julian Birkinshaw1

Three Rules for These Times

Three Rules for These Times

10:42 PM Monday May 18, 2009
by Alan M. Webber

Most economists agree that the worst of this financial meltdown is now behind us. Unemployment is at a 25-year high, it's true, but at least the pace of lay-offs has slowed. If there was a doubt before, it seems safe to conclude that we're going to make it through this mess. There will be enormous social costs. People have lost their livelihoods and their life savings. Seniors have seen their retirement nest eggs disappear; young people have seen their employment hopes vanish. But we're going to make it.

The question is, what, if anything will we learn from this disaster? Already economists are subjecting their field to a long overdo critical review. In their thoughtful book, "Animal Spirits," George Akerlof and Robert Shiller, suggest that economics has left out the human factor--the emotional components that drive economic behavior. Alan Greenspan has publicly acknowledged that his mental model of the economy clearly did not match reality. It seems clear that we'll soon see new regulations put in place, new oversight and legislation designed to change the way the public sector referees the behavior of the private sector in economic matters.

But what if the problem isn't economics? What if the problem is a business problem--a failure of management and an absence of leadership? Shouldn't business and business schools be looking at their practices and precepts with the same critical eye as the economics profession? I recently wrote a book called Rules of Thumb, a collection of 52 life lessons. I think three of them can help propel the thinking on these issues in the right direction.

Years ago, when America's competitiveness appeared to be failing, two legendary HBS professors, Bill Abernathy and Bob Hayes, challenged business schools and business leaders to take a hard look at themselves. "Managing Our Way to Economic Decline" became a must-read text. Isn't it time for another such review?

What is the business of business school? And what is the purpose of business?

At least once per decade for the last 30 years we've seen American business go seriously off the rails. The reengineering fad, Mike Milken and junk bonds, the savings and loan crisis, the dotcom boom and bust, the Long Term Capital Management panic--only a partial, abbreviated history of business disasters--suggest that something systemic is wrong with the way business goes about business. An individual with this track record of crises would be a candidate for an intervention, a time out in a recovery center, and life-long participation in the 12-step program of their choice. Something is wrong--and it's time to face it.

Business schools teach finance and strategy, marketing and HR, IT and operations management. Those are the courses of a trade school, not the developmental curriculum of a profession.

The first question business schools should teach their students to ask is my Rule #3: Ask the last question first. The last question is, what's the point of the exercise? Jack Welch famously said it was to maximize shareholder value--a terrible answer in retrospect. Peter Drucker famously said it was to make and keep a customer. What is the answer that fits our situation in 2009, and beyond? Today, business schools need to teach students to ask the last question first--or risk taking their company down the old dead-end path.

The next piece of the curriculum has to be Rule #23: Keep two lists, one that holds what gets you up in the morning and one for what keeps you up at night. Managers and leaders have got to know themselves before they know their businesses. They've got to have passion for their work and concern for their world. Otherwise they're just punching the time clock and risking everyone's future.

Finally I'd teach Rule #4: Don't implement solutions. Prevent problems. Everything that will be put in place as a clean up to the mess we're in now won't be enough if we keep creating new disasters. We need a new generation of business leaders who anticipate problems and prevent them from happening. It's smarter, cheaper, and more effective than the every-ten-year clean up we've become accustomed to.

Every one of these three rules has two things in common. First, they cut across all the disciplines of traditional business school. They are ways of seeing the world, ways of making sense of everyday business realities. They teach a way of thinking and a way of synthesizing the world of work that every crisis--and every opportunity--shows us we need. And second, they are about people, not about business. They are about the human side of enterprise. They carry the message that work is personal. That each individual has a contribution to make and a decision to weigh. That we have to decide not only what we will do in business, but even more important, how and why we will do business the way we do it in the first place.

It's time for new course-ware in the business of doing business.

Alan M. Webber is an award-winning, nationally-recognized editor, author, and columnist.

How to Innovate Like Apple

How to Innovate Like Apple
by Chris Morrison

Apple makes it look easy. From the sleek design of its personal computers to the clever intuitiveness of its software to the ubiquity of the iPod to the genius of the iPhone, Apple consistently redefines each market it enters by creating brilliant gadgets that put the competition to shame. What’s the secret? Apple has built its management system so that it’s optimized to create distinctive products. That’s good news for would-be emulators, because it means Apple’s method for innovation can be understood as a specific set of management practices and organizational structures that — in theory, at least — anyone can use. This Crash Course outlines the techniques Apple uses to make the magic happen.

• It may take several years to cultivate new skills and rebuild your product lineup.
• You’ll need funding to create a dedicated innovation team and sufficient capital to rethink your product lineup.
• Strategic clarity: Innovating effectively means creating your own opportunities in a crowded marketplace to avoid both mediocrity and commoditization.
• Patience: Creativity is a fickle thing, and it doesn’t always follow the clock. False starts and the occasional flop are part of the process and must be accommodated.
• Strong leadership: Innovation doesn’t happen by committee. Visionaries with effective management skills are hard to find, but they’re a critical ingredient for success.

Clear Your Mind

GOAL: UNDERSTAND WHAT IT TAKES TO CREATE TRULY REMARKABLE PRODUCTS.

The word “zen” is often applied to both Apple’s products and the company’s highly focused CEO, Steve Jobs. And while the compliment usually refers to the beauty of the company’s minimalist products, enlightenment is more than skin-deep. “In most people’s vocabularies, design means veneer. It’s interior decorating. It’s the fabric of the curtains or the sofa,” Jobs has said of his product philosophy. “But to me, nothing could be further from the meaning of design.” Design is a “fundamental soul,” Jobs says, that expresses itself through an end result — the product.

What is Apple’s fundamental soul? The company’s motto, “Think Different,” provides a hint. Apple maintains an introspective, self-contained operating style that is capable of confounding competitors and shaking up entire industries. For example, Nokia, once considered the undisputed leader in mobile phones, never anticipated that a single product from a computer maker might throw its ascendancy into question.

Internally, Apple barely acknowledges competition. It’s the company’s ability to think differently about itself that keeps Apple at the head of the pack. Current and past employees tell stories about products that have undergone costly overhauls just to improve one simple detail. Other products are canceled entirely because they don’t fit in or don’t perform up to par.

Apple’s culture has codified a habit that is good for any company to have but is especially valuable for firms that make physical things: Stop, step back from your product, and take a closer look. Without worrying about how much work you’ve already put into it, is it really as good as it could be? Apple asks that question constantly.

Build Your Fortress

GOAL: CREATE THE INFRASTRUCTURE YOU NEED TO INNOVATE.

From the outside, Apple’s offices look like those of just about any large modern American corporation. Having outgrown its headquarters campus at 1 Infinite Loop in Cupertino, Calif., Apple now has employees in other buildings scattered across the town and around the world. Size and sprawl are formidable challenges that most companies manage gracelessly, either by splintering into disorganized, undisciplined communities or by locking employees into tight, stifling bureaucracies. Apple tends toward the latter, but it does so in a unique way that generally (but not always) plays to its advantage.

At its worst, Apple’s culture resembles the closed paranoia of North Korea. For example, one Apple source who agreed to be interviewed anonymously for this story backed out at the last minute. Why? He feared that his employer would examine his phone bill and find him out. Another spoke on background but mentioned the possibility of a lawsuit if he were quoted by name. These are common fears within Apple, and they really do keep the company’s employees quiet. The obsession with secrecy is a double-edged sword, however: It gives Apple a vital element of surprise in the marketplace, but the never-ending game of internal spy vs. spy is draining for rank-and-file employees. Indeed, the corporate culture came under scrutiny recently after an employee of a foreign supplier — reportedly under suspicion for leaking the prototype of a new iPhone — committed suicide in Shenzhen, China.

Beyond the secrecy, which affects everyone, Apple’s approach is hardly one-size-fits-all. Rank-and-file employees are often given clear-cut directives and close supervision. Proven talent gets a freer hand, regardless of job title.

Checklist

MANAGING DIFFERENT

Over time, Apple has built a seasoned management team that’s optimized to support bold new product initiatives (and recover from the occasional flop). Here are a few of the techniques Apple’s management uses to make the magic happen.

1. Ignore fads. Apple has held off building a cheap miniature laptop to respond to the “netbook” fad, because these devices don’t offer good margins. Instead it released the ultrathin, ultra-expensive Air, a product more in line with its own style.

2. Don’t back down from fights you can win. Apple is a tough partner and a ruthless enemy. In 2007, Apple pulled NBC’s television programs from the iTunes Store after the network tried to double the prices consumers pay to download shows. NBC backed down within days, and ever since, giant media conglomerates have been hesitant to face off with Apple over pricing.

3. Flatten sprawling hierarchies. Companies with extended chains of authority tend to plod when it’s time to act. Most of the decisions at Apple come from Jobs and his immediate deputies.

4. Pay less attention to market research and competitors. Most firms develop their products through a combination of touchy-feely consumer focus groups and efforts to imitate successful products from other companies. Apple does neither, and the iPod and iPhone are clear proof of that.

Cultivate Your Elite

GOAL: EMPOWER YOUR MOST VALUABLE EMPLOYEES TO DO AMAZING WORK.

In truly despotic societies, both art and science suffer terribly. Apple, on the other hand, reliably churns out the industrial equivalents of da Vinci paintings and Hokusai woodcuts. This has little to do with how the company treats employees in general. Rather, it stems from the meticulous care and feeding provided to a specific group: the creatives. Apple’s segmented, stratified organizational structure — which coddles its most valuable, productive employees — is one of the company’s most formidable assets.

One former Apple consultant tells of an eye-opening introduction to Apple’s first-class treatment of its creatives. The consultant visited Apple’s Industrial Design Group, the team that gives Apple products their distinctive, glossy look. Tucked away within Apple’s main campus, the IDG is a world unto itself. It’s also sealed behind unmarked, restricted-access doors. Within the IDG, employees operate free from outside distractions and interference. “It didn’t feel like working at Apple,” our source remembers. “It felt like working at a small design firm.” Some companies are famous for perks — Google, for example, with its free massages and gourmet lunches. Apple focuses on atmosphere, nurturing its best designers behind opaque glass in a hidden sanctuary with music playing in the background.

Despite their favored status, Apple’s creatives still have no more insight into the company’s overall operations than an Army private has into the Pentagon. At Apple, new products are often seen in their complete form by only a small group of top executives. This, too, works as a strength for Apple: Instead of a sprawling bureaucracy that new products have to be pushed through, Apple’s top echelon is a small, tightly knit group that has a hand in almost every important decision the company makes.

Case Study

NURTURING INNOVATION AT CISCO

Other firms have also found success by separating innovation from business as usual. Here’s what David Hsieh, vice president of marketing at Cisco, has to say about his company’s Emerging Technologies Group:

“Big companies have a tendency to eat their own children. They get afraid of disrupting their own revenue stream with a new unit, or someone has a great idea and an executive sponsors it, but the moment the sponsor comes under pressure, they ditch all the little initiatives to focus on their core business. The advantage of a new unit is to insulate it from people who say, ‘We can’t do it that way because we’ve done it a different way for years.’ You want to enable a group of people to think more broadly and creatively without outside pressures. Cisco’s Emerging Technologies Group has been in operation for three years, and it’s created a number of businesses. The early ones are all growing successfully, even in a bad economy.”

Don’t Rush, Don’t Dawdle

GOAL: PREVENT SHORT-TERM, CYCLICAL, OR COMPETITIVE PRESSURES FROM OVERWHELMING AN EFFECTIVE STRATEGY.

It’s often said that people in particular cultures live life at their own unique paces. Americans are seen as hard-driving and somewhat shortsighted — a side effect of a business culture that takes its cues from the stock market’s emphasis on quarterly results.

Apple is different because Apple dances to a rhythm of its own making. Although its rising stock has become a vital part of many portfolios, Apple cancels, releases, and updates products at its own speed, seemingly irrespective of market conditions or competitive pressure. Apple doesn’t telegraph its moves, either: The iPod and iPhone, iconic products both, each began as rumors that Apple seemed determined to quash.

Plan B

STAYING COOL WHEN THE HEAT IS ON

Your stock price is down, your customers are angry, and investors are banging on your door. Sure, acting like Apple seems like a good idea — until your board starts craving blood. How do you maintain a focus on innovation when you don’t have a few successful quarters to back you up?

For a vivid demonstration of how to publicly recover from your errors (in style, no less), check out the video of Steve Jobs’ 1997 Macworld addressand an associated BNET feature, How to Present Like Steve Jobs.

Clone Your Own Steve Jobs

GOAL: IF YOU PUT A TYRANNICAL PERFECTIONIST IN CHARGE, INSTITUTIONALIZE HIS THINKING.

New adherents to the cult of Steve Jobs may be surprised to hear this: The most iconic Apple laptop, the original PowerBook, was released in 1991, after Jobs had been absent for six years. The smug hipsters who line today’s cafes with rows of identical MacBooks are merely updated versions of their counterparts from the early ’90s. Yet Jobs was in no way responsible for this enduring innovation.

So does that mean Steve Jobs is irrelevant? Or is Jobs — and his maniacal focus on building insanely great products — a necessary ingredient of Apple’s success?

Historians have long grappled with a similar question: How critical are those rare, world-changing “great leaders” whose efforts seem irreplaceable? Most historians now believe that great leaders are made by their circumstances and that their great deeds actually reflect the participation of thousands, or even millions, of people. In the case of Apple, there would be no Mac, no iPod, and no iPhone without the efforts of thousands of engineers and vast numbers of consumers who were looking for products that better served their needs.

That said, Jobs cuts an impressive figure, and if he was “made” by his circumstances, that process took many years. Remember that the first edition of Steve Jobs — the young inventor who, at 21, created Apple Computer — was not the visionary we know today. Instead, after nine years at Apple’s helm, the young Steve Jobs was ousted because of his aggressive, take-no-prisoners personality, which created a poisonous, unproductive atmosphere when it pervaded the company.

Today’s Steve Jobs seems to have learned how to focus that aggressive, take-no-prisoners personality more shrewdly, and to great effect. While he’s still an essential part of Apple’s success, the company has also institutionalized many of Jobs’ values to such an extent that Apple is now far less dependent on him. Tim Cook, for example, worked well as acting CEO during the first half of this year, when Jobs was on sick leave. But questions remain. So long as the overwhelming personality of Jobs is present, can anyone really grow into that position? Only when Jobs steps back from his role permanently will we really be able to determine how well Apple has learned the lessons he has taught.

why emails generates fight

Why You Need to Become a Great Explainer

A speech is only so many pretty words until you drive home the message in a way that connects with the audience. That’s why you need to pay more attention to how you use explanation to describe benefits, challenges, and to set expectations.

Communications expert John Baldoni hits on the power of explanation in a recent blog post on Harvard Business Publishing, where he notes that President Obama has shifted rhetorical gears to become less lofty and more concrete through the deft use of explanation. Says Baldoni:

“Explanation is a key attribute of leadership communications. Leaders know to inject their communications with verve and enthusiasm as a means of persuasion, but they also need to include an explanation for the excitement. What does it mean and why are we doing it are critical questions that every leader must answer with straightforward explanations.”

Write that down for your next presentation: “What does it mean and why are we doing it.”

Baldoni offers three ways to become an effective explainer:

1. Define what it is.
2. Define what it isn’t.
3. Define what you want people to do.

But a great explainer don’t merely cite a laundry list of benefits. Too much detail can put an audience to sleep, but too few details won’t be convincing. Here is how Obama explained in an interview the importance of using taxpayer funds to assist GM and Chrysler.

“Our auto industry is the foundation for economies all across the Midwest and ultimately, for the country as a whole. And had we allowed GM or Chrysler simply to liquidate, that would have been a huge anti-stimulus on the economy as a whole, and could have dragged us even deeper into recession or even depression.”

5 Personal Core Competencies for the 21st Century

Managing Ambiguity. “Managing ambiguity is that tension between rushing to the clear, the concrete, and managing this ambiguous fuzzy area in the middle. And managing ambiguity is something we have to teach. Because we have to counter the story of a single linear solution.”

Agency and Responsibility. “We have to be able to take responsibility and know what that means. Being an effective agent means being able to approach one’s environment, social or physical, with a confidence that one actually will be able to deal with it.”

Finding and Sustaining Community. “Managing community is partly about that multitasking of connecting and interacting. It’s also, of course, about maintaining community, about maintaining links with people, making sure you do remember your best friend’s birthday, that you don’t forget that your grandmother is by herself this weekend, and of course recognizing also that one is part of a larger community, not just one’s own private little world.”

Managing Emotion. “Really it’s about getting away from the idea that emotion and reason are separate… Teaching young people to manage reason and emotion and not to flip to one or the other is an important part of our education process.”

Managing Technological Change. “When we have a new tool, we first use it for what we are already doing, just doing it a bit better. But gradually, the new tool changes the way we do things. It changes our social practices.”

Tiger Woods' Loss: A Reminder for Leading Businesses

Tiger Woods' Loss: A Reminder for Leading Businesses

ANTHONY TJAN

Yesterday, Tiger Woods, the world's undisputed number one golfer, lost a major after having the 54-hole lead for the first time in his career. His prior major record was 14-0 going into Sunday with a lead. He started yesterday with a two-shot lead and wore his symbolic Sunday victory red shirt. Every Tiger shirt at the venue was sold out by end of day Saturday. The consensus was clear that Tiger had this all but wrapped. Unless someone played brilliantly, Tiger would never lose it.

Y.E. Yang played amazing golf on Saturday and Sunday. But make no mistake about it, Tiger (and I am a huge Tiger fan) let this one slip. What does this moment in golf history have anything to do with business?

First, there is inordinate pressure at the top. Tiger Woods' focus and mental intensity are peerless, but he is human, just as businesses are, well, just businesses. Companies that are on top today have the odds stacked against them being leaders in the long run. Getting there is easier than staying there.

At the end of the day, statistics win and the statistics of business say that those in a top market-share position will almost certainly lose it or cede share. The question is not if, but when. It does not mean that the companies will not stay strong, important, and highly relevant, but it means that existing and new competition will take some shine off the star. Think of IBM today versus a couple of decades ago or GM as a government bailout asset versus its glory days. Heck, don't even go back that far. Just look at the top ten Internet properties today versus those three to five years ago and you find that many were barely in existence let alone on a top list a few years ago.

Second, competition will come from where and when you least expect it. Y.E. Yang was hardly a household name (at least in America) before this weekend. He was the 110th ranked golfer in the world with only one prior PGA tour win. There are business parallels. I don't think when Sony was on top of the portable music player market they ever suspected Apple to rise from the dead and dominate that space today. I doubt that the Clinton contingent ever imagined that the Junior Senator from Chicago (who they helped get elected) would move a nation behind him to win the presidency. And I doubt that Tiger Woods ever imagined that he'd lose this major to Y.E. Yang in the last major of the year. Padrig Harrington, Vijay Singh, Ernie Els, maybe, but Y.E who?

Being on top can foster complacency or an "if it ain't broke don't fix it" attitude. But to stay there, you need to continue to reinvent and learn. You need to to pay attention to people and areas where you don't suspect a threat. Staying relevant means staying abreast of those who want to be relevant and of customers in your industry and your adjacent industries. This is so challenging because it requires both intensity and open-mindedness.

One of Tiger's greatest qualities is his push to revisit and adjust his swing towards maintaining his domination of the game, which despite yesterday's aberration will continue for some time. Successful businesses also need to continually reframe their markets and business definitions to try and understand where things are going and where new competition might emerge. This means focusing on current customers while also understanding the customers of tomorrow.

I am often amazed as I watch my five-year-old navigate effortlessly on the iPhone to find his videos, pause them, switch to the key pad, and then play with one of the apps he has downloaded. The smart phone leaders of Apple and BlackBerry might want to project forward to what my son will want when he is ten.

Why Few Executives Are Skillful Managers

GILL CORKINDALE
Why Few Executives Are Skillful Managers
12:43 PM Wednesday August 19, 2009

Tags:Global business, Leadership, Managing yourself

I work with senior executives from all over the world with remarkably diverse industries, backgrounds, and cultures, yet it's always a surprise to realise that their development needs are very similar. How can it be that a French CFO of a luxury goods company has the same management problems as a Kuwaiti operations manager? Or that a Japanese quality assurance manager has to deal with the same people issues as a German investment banker?

The answer is partly due to the fact that there is a fundamental human psychology and partly because globalisation has narrowed the gulf between cultures. But there is another underlying truth: despite the billions of dollars, euros, and yen invested in coaching and management development, remarkably few executives can be regarded as skillful managers. It's my guess that the majority of managers with responsibility for large teams and significant businesses either do not possess the requisite skills of a manager — or they just don't put them into practice. Why?

There are three main reasons. First, lack of time and pressure to deliver results make it almost impossible for executives to reflect, consider, and apply their new skills. Second, budget constraints can result in a lack of support and follow-through on the best intentions. Finally, behavioural change is difficult — it's all too easy for a development plan to slip to the bottom of the to-do list.

With these thoughts in mind, I offer my clients a short and simple management development plan to get them going. After they have mastered these fundamental skills, we can move on to what I call the "higher order" skills that will transition them to leadership roles. There are three rules and five key development areas:

Rules:

Commit to the plan for six months. Be prepared to check in with your coach or line manager on any changes you notice and any suggestions for tailoring your plan.
Trust that the plan will make your life easier and less complicated in the long run
Be open to experimenting — and have fun learning about yourself and others
Development Areas:

1. Delegation
It is your job to delegate as much as you possibly can: your ultimate goal should be to delegate everything, find a successor and move on to a bigger job. If you are having trouble letting go or trusting others, try to remember how it felt when you were given the first big challenge of your career. Did you relish the challenge? How did you approach it? Did you succeed? What did you learn about the job and yourself? How did it help you to move forward in your career?

Remember that however talented you are, your career is likely to have stalled had your boss not trusted you with a challenging piece of work. He took the risk and delegated: now it's your turn to do the same. No excuses, just follow the rules.

2. Managing distance
One of the biggest mistakes you can make as a manager is to spend too much time either in your team or away from it. If you are too close, you risk becoming a micromanager, you can lose perspective on the business, you can become too friendly and lose authority within the team, and your team can become over-dependent on you. Being too distant, on the other hand, can result in a directionless team, potential crises, lack of control, and you being perceived as too remote or political. Also, maintaining social distance is an important discipline for managers that should not be overlooked.

3. Visibility
Visibility and personal profile are important for your career as well as your team, so make sure you are being seen and heard in the right places. If you don't manage your reputation and profile, someone else will do it for you — and they may not have your best interests at heart. Take time to network, share your successes, and ask to be included on steering committees or cross-functional initiatives to create opportunities to showcase your talents and your team's achievements.

4. Work-life balance
It's incredible that this point still needs to be reinforced. Remember that you are a human being, not a machine. You may pride yourself on being able to work long hours, never taking a holiday and putting your company before your own health and well-being (and that of your family). But be very clear that you cannot do this forever. Sooner or later your health will give up and you will no longer be in control. Burnout is a one-way ticket, so be sensible. It's smart to look after yourself. Work reasonable hours, keep the weekends sacred, leave early one evening a week and build in an exercise schedule. Not only will this help you keep effective, it will make you easier to be around and probably prolong your career.

5. Continuous learning and reflection
Adaptability and being able to flex your style as your company or situation changes are critical. Seeking feedback, identifying your development needs, and monitoring your own progress are all vital if you are to develop as a leader and a person. Lasting behavioural change requires time, patience, dedication, and support, so don't expect it to happen overnight. One of the best things you can do to support yourself is to give yourself time and space to reflect: try to schedule a meeting with yourself for an hour each week for reflection.

These are my suggestions — but what do you think? Have you focused on any key areas that ensure you are more effective as a manager? If so, what difference has it made in your career? And what lessons have you learned from other managers?

Creating a Culture of Innovation