November 17, 2008

A Lost Economy

These are challenging times. Look at the economic landscape. On the plus side, inflation up, energy prices up, commodity prices up, jobless rates up. On the negative side, American dollar down, discretionary spending down, stock prices down, consumer confidence down. Not a good equation. Look closer and you’ll see inventory building, layoffs by the thousands, budgets freezing. Look even closer: a mom in a store aisle. She is surrounded by hundreds of me-too products, dozens of line extensions, and as many pricing options. At the end of the day, these choices are irrelevant. The real decision she is making is whether to spend an extra dollar on her favorite brand or save that dollar for the gas pump. Increasingly, she goes with a generic product—after all, she rationalizes, it’s pretty much the same thing—and uses that dollar when filling up her tank thirty minutes later.

This is the new face of competition. You are no longer fighting just in your category, brand against brand, line extension against line extension, price against price. You are now fighting against lost income, lost confidence, lost purchasing power. You are fighting against a lost economy.

October 15, 2008

Long Delay

Yeah, this blog fairly died with negligence. But my thinking of strategy and the fog often pervading it have not. Stay tuned.

What's more important: customer needs or company capabilities?

I just talked with an innovation manager for a multi-billion dollar consumer goods manufacturer. She feels frustrated because internal politics dictate that the company focus on innovating products within the bounds of production capabilities rather than the ultimate needs of consumers. In her opinion, their new product development efforts are stymied with an emphasis on now (operating effectiveness) versus future opportunity and growth.

Obviously, there should be a balance between the needs of current capabilities and the needs of your customers--but what is that balance, and you do you get it? To what extent do you, can you, put the customer first?

November 13, 2007

Strategy as Innovation Management

If innovation is change management, as I claimed in my last post, where does that leave us? For starters, it gives us a platform for understanding strategy. Strategy is all about taking a business from its current state, which may or may not be glorious, into a future state which, if the strategy is executed correctly, is most definitely glorious. In other words, a business strategy maps out how a firm will become better, healthier, more vibrant. And how can you best measure the health of a business? Simple: the value it creates.

Healthy businesses generate customer value. To get healthier, a business must create more value. Sick businesses don't create enough customer value.

Tracing this back to strategy: to get healthier, a firm must execute against a good strategy, thereby creating more value. This begs the question: how does a firm create more value? Well, quit begging, because the answer is simple. Innovation. That's right.

Remember: innovation is change management. How so? Any change in a firm ought to be, in some way, a change to improve the firm's health, a change to generate or capture more value. Innovation is the management of that change. At any point of time, a firm may have countless changes occuring. Each needs to be managed. That's innovation.

But, unless innovation is itself managed, these cumulative changes may have a negative effect. One change may counteract another. This is where strategy comes into play. Strategy is about ensuring that organizational change, which spans multiple innovations, has a focus, a structure. Strategy is managing innovation.

Innovation as Change Management

Recently, I've had a conversation with an individual from a consulting firm focused on strategy and innovation. An upcoming project, she said, will be focused on "'leading change,' which is often an outcome of innovation." That sounds good, right? Change results from innovation. And, of course, you have to lead that change, take charge. The change must be managed. Right?

Wrong.

First, let me say that I agree that change must be managed. But I disagree, with great violence, that change is an outcome of innovation. Let me repeat that: change is NOT an outcome of innovation. Rather, innovation--by its very essence--is an outcome of change. More precisely, innovation is all about the ways in which a business manages change.

In a business, change, whatever it may be, is an act of human creation. Change is invention, an idea in action. Innovation is shepherding change in a way that aligns with a business, in a way that ensures value is improving. Innovation is managing change.

How to Innovate: Don't Listen

When you have a great idea, and you know it is great, and you know it is different, the best advice you can have is: don't listen. Don't listen to customers. Don't listen to associates. Don't listen to partners, colleagues, suppliers. And, sure as hell, don't listen to the market.

The core of the idea, its essence, needs to stay true to its origin. If you listen, you may hear different ideas, different perspectives, different thoughts. This is not bad--far from it. But if your idea is golden, why mix in copper and iron and mud? Unless what you hear from others is complementary to your gold, perhaps gilded platinum laced with diamonds, why should you let others influence and erode the value?

Often, the value of the best ideas are not recognized. And you, whatever your role, must be a strong, unbending leader. Carry out your vision, your idea, regardless of what others say. You may hear "No, it cannot be done." Or "Who would want that?" Maybe "Huh? I don't get it." Worse yet you may hear "That's a great idea, but people won't get it. If we just change it a bit..."

If your idea is great, and you know it, you're absolutely convinced, then, dammit, don't budge. Not a meter. Not a millimeter. Stand tall, stand firm, stand true. Stand against the barrage of what others tell you, their advice, their pleadings. Then, step by step, move forward--with resolve, determination, fierce will. Make your idea happen. Don't listen.

How to Innovate: Listen

Listen to everybody. Listen to your customers, your associates, your partners, your supppliers. Listen to your stakeholders. Listen to your friends. Put your ear to the market. Listen to your competitors. Listen to trends. Listen to shifts. Listen to everything, everywhere, everyone.

Because you're bound to hear opportunity knocking. You'll hear pains, needs, desires. You'll hear frustrations over existing solutions, products, services. You'll hear complaints and grumblings. You'll hear agonies and joys. You'll hear where you can serve market needs.

And, when you listen, do you hear nothing? If you do, what are you going to do about it? Here's my idea: jump on the opportunity. If you hear nothing, you may have found a place where there is no market or explicit need. This could be huge. If you can develop the right product or service, you can create noise in the market. They have names for this approach: disruptive innovation, blue ocean strategy, etc. And when you do this, the market is no longer silent. It clamors, trembles, and surges. If you listen again, you may hear surprise. You may hear discussions about what you have done. About you. Your innovation. By the time you hear this, however, you're at the top of the hill--nowhere to go but down. So ignore it. And listen again in a different spot. Start over. What do you hear?