Review: The Innovator’s Guide to Growth

The Innovator’s Guide to Growth, by Scott Anthony, Mark Johnson, Joseph Sinfield, and Elizabeth Altman. Harvard Business Press, 2008. http://www.innovatorsguidetogrowth.com

“Innovation” is a term that’s hard to define precisely. It can mean different things to different people at different times. Newness, invention, change, and creativity are generally associated with innovation. Still, as a field of inquiry its boundaries are blurred.

For companies looking to innovate their businesses, this vagueness presents challenges. How do you start innovating? How do you know when you’re innovating? How do you manage it? Or even more elusive: how do you measure the outcome of innovation? How do you calculate ROI? All of this begs the larger question, Is there even a process for consistently innovating?

Some people believe there isn’t any single method for companies to innovate. Scott Berkun, for one, author of The Myths of Innovation, has this to say to the common question, How do you systematize innovation?:

It’s as absurd a question as asking how to control weather or herd cats, because those approximate the lack of control and number of variables inherent in innovation. [1]

Berkun cites an interview with Steve Jobs in Business Week as an example [2]:

Business Week: How do you systematize innovation?

Steve Jobs: You don’t. You hire good people who will challenge each other every day to make the best products possible. That’s why you don’t see any big posters on the walls around here, stating our mission statement. Our corporate culture is simple.

“You don’t” is not the answer managers want to hear. (BTW, if Apple is not trying to innovate, they are doing a good job it!) Notice Jobs focuses on corporate culture instead. Innovation seems to come from within at Apple—it’s about the company’s attitude, ethos, and vision.

A key problem in systematizing innovation is the fact most attempts at innovation don’t succeed. Embarking on an endeavour that has more than a 50% chance of failing can hardly be considered a “system.” What’s more, innovations often have a long gestation period from first conception to becoming a viable business venture—sometimes decades. Bill Buxton refers to this as the “long nose of innovation” [3]. He writes:

The bulk of innovation behind the latest “wow” moment (multi-touch on the iPhone, for example) is low-amplitude and takes place over a long period—but well before the ‘new’ idea has become generally known, much less reached the tipping point.

But it really doesn’t make much business sense for companies cross their fingers and hope that one-in-a-thousand ideas develops into a viable solution.

Or does it?

Consider what’s going on at Whirlpool. A recent Business Week article outlines their program for letting thousands of ideas bubble up. [4] Each idea is then systematically reviewed by trained innovation experts with a formalized process. The i-box, or so it’s called, is a detailed score card used to evaluate innovative ideas.

Another key element in Whirlpool’s innovation program is the i-board—a 15 member panel that regularly reviews innovative ideas and funds them, as needed. Such a program takes a lot of commitment and lot of money—an estimated several million dollars a year in North America alone. But it pays off in the end: Whirlpool hopes to have $4 billion dollars in sales from its new innovations.

Whirlpool’s approach represents what’s called “green housing.” Essentially, green housing is about letting new ideas live as long as possible before either killing or supporting the idea. The company ?What If!, a consultancy in business creativity, describes green housing as follows:

Green housing is the behaviour that protects young ideas when they are at their most vulnerable, and nurtures them into healthy growth. It is an interactive behaviour that enables people to get the most out of their initial thinking by supporting each other’s ideas.

The reason green housing is so important is that creativity is rarely a sudden flash of inspiration leading to the perfect invention…We believe that green housing behaviour is at the heart of creativity in business. [4]

This makes sense. History is riddled with examples of innovations not being recognized as such on first sight. It took six years for the Wright brothers to sell an airplane commercially. Western Union turned down Alexander Graham Bell’s idea of the telephone. Yahoo! turned down Google when approached by Brin and Page at the end of the 90s. Even with a detailed scorecard, like Whirlpool’s i-box, recognizing the potential of an innovation very early in its lifecycle is difficult, if not impossible.

Still, most managers can’t place bets on every idea—even every great idea—that comes through the door. Nor can most companies fund an endless garden of inventions indefinitely. Businesses need more structure around the innovation process.

Enter The Innovator’s Guide to Growth.

If the outcome of innovation can’t be predicted consistently, the forces that shape and act against innovation can be. Perhaps this is splitting semantic hairs, but it’s an important distinction to understand before reading book. The authors explain:

Some managers believe there is no way to guide the innovation journey, because innovation is just random and unpredictable. If innovation is indeed a black box, the best that companies can do is let a thousand flowers bloom, in the hope that one of them sprouts into a substantial growth business. This is a bit like releasing a thousand monkeys into a room full of word processors and hoping they’ll produce Shakespeare. If you are lucky enough to have it happen once, you surely wouldn’t expect it to be repeatable.

Research over the past two decades has shown that many successful strategies for new growth actually adhere to a specific pattern. (p. 121).

And that’s what the Innovator’s Guide to Growth is really about: the observable, repeatable patterns of the innovation process. It’s a complete how-to book for managers looking to create growth through innovation. It takes the hit-or-miss approach out of the equation and provides a rational framework for understanding and managing innovation. And it’s based on years of experience observing and consulting companies on innovation from top experts in the field.

What’s more, the authors of The Innovator’s Guide to Growth also agree that innovation should come within. Ultimately, this is the book is about how companies can transform their organizations internally.

Disruptive innovations—in the Christensenian sense of the word—is a key lever to growth according to the authors. To recall, disruptive innovations are products, services, or approaches that transform existing markets or create new ones by trading off performance in favour of simplicity, convenience, affordability, or accessibility. This contrasts sustaining innovations, or innovations that maintain established performance improvement trajectories by offering demanding customers better performance. Disruptive innovations, on the other hand, change the competitive playing field fundamentally. The authors emphasize:

Our belief is that if you want to influence or shape a market in which you compete, sustaining strategies are the key to achieving your goal. But if you want to redefine a market, create a new one, or defend against attack from below, disruptive strategies are essential to success. (p. 5)

A brief note on terminology: In The Innovator’s Dilemma, Clayton Christensen’s best-selling book from 1997, the author introduces what he called disruptive “technologies.” Here, he meant “technology” to mean “the processes by which an organization transforms labor, capital, materials, and information into to products and services of greater value” [6]. That is, he wasn’t only talking about hardware and capability—although those, too, could be disruptive. But “technology” is a loaded term that triggers specific associations, and many people misunderstood Christensen’s sense of the word: they assumed he was talking about hardware and capability. Later, in The Innovator’s Solution, the sequel to The Innovator’s Dilemma, Christensen changes the phrase to “disruptive innovations.”

Now, in The Innovator’s Guide to Growth we’re starting to see the phrase “disruptive strategies,” as evidenced in the quote in the preceding paragraph. This shift in focus—from “disruptive technology” to “disruptive innovation” to “disruptive strategy”—represents an important conclusion in The Innovator’s Guide to Growth: true disruption rarely comes from the features and functionality of a company’s offering. It’s not about technology, but instead business models: they are the key to disruption. As Mark Johnson and colleagues conclude in a recent Harvard Business Review article:

Truly transformative businesses are never exclusively about the discovery and commercialization of a great technology. Their success comes from enveloping the new technology in an appropriate, powerful business model. [7]

Keep in mind, too, that disruptive innovations aren’t the same as breakthrough innovations. Next generation mobile phones with faster transfer rates, 5-blade razors, the Airbus 380: these are all breakthroughs, but they are not disruptive. Ten-seat planes used as taxis, $25 mobile phones that only make calls, and online word processors with limited functionality that are free: these are disruptive. Simpler. Cheaper. More convenient.

In any example of a disruptive innovation you’ll see hard tradeoffs being made along one dimension in favour of another dimension. Mastering tradeoffs is therefore a key element in disruption. Sometimes, this means turning conventional wisdom on its head and, above all, breaking the rules. Disruptive offerings typical don’t compete along the traditional dimensions as the rest of the mainstream market.

The authors give several examples of these kinds of counterintuitive tradeoffs and rule-breaking that leads to disruption. They cite the following examples, among others:

• “Everyone in the mop category know that a map was a onetime purchase, until Procter & Gamble introduce Swiffer, whose consumable cloths now produce close to $1 billion in annual revenue.
• Everyone at Dow Corning knew that the company couldn’t afford to compete in the commodity end of its business, until its Xiameter distribution channel became a booming growth offering.
• Everyone in the music industry knew that people who had access to pirated music wouldn’t pay anything for MP3 files, until Apple’s iTunes showed how a well-designed, reasonably priced model that was tightly integrated with Apple’s iPod music player could thrive.” (p. 7-8)

This suggests looking at all of the assumptions that currently drive a mainstream market and reversing though assumptions to arrive at disruptive innovations.

The consequence of not making hard tradeoffs is what the authors call overshooting. In the pursuit of increased profits, companies naturally tend to pack more and more performance in their offerings. The result is that the average person over-served and, in the worse case, can’t use the product or service at all. But here is the dilemma: these companies have to add features and functionality, or sustaining innovations, to even compete in the market in the first place.

Consider the popular netbook. For about $300 you can easily surf the web and do basic word processing. Most people can get most of things done they need with the  netbook. This is referred to as “good enough” design.

Sales of netbooks took off, and entrants into the laptop market disrupted that space. This disruption, however, was only temporary: market incumbents quickly—and seemingly easily—matched the “good enough” design and offered their own netbooks. Today, nearly all of the computer manufacturers offer netbooks. Still, the initial disruption put companies like ASUS onto the map of a crowded playing field.

The Flip digital video recorder is another example of “good enough” design. This device does essentially one thing: makes short videos. It’s small and convenient to use. A built-in USB connector allows you to upload videos to your computer within seconds after filming (and directly to YouTube, as well). And there’s only a few buttons, so the learning curve for nearly every function is about 2 minutes—without training and without the help of manual. The Flip is really defined by what it DOESN’T have: there are no menus, no settings, no video light, no optical viewfinder, no special effects, no headphone jack, no high definition, no lens cap, and no memory card.

Again, this approach works: the Flip Ultra has been the best-selling camcorder on Amazon since its release. And it gained about 13% of the video recorder market in its first year. As David Pogue, technology reviewer for the New York Times concludes about the Flip:

The lesson is one that the electronics industry seems to miss over and over again: that creeping feature-itis often impairs your product instead of improving it. In the Flip’s case, the size, shape, ruggedness, low price and one-button simplicity take it places where no real camcorder would go. [8]

But it’s not easy to disrupt, particularly for market incumbents. Disruptive innovation strategies require deep organizational transformation. This means making tough changes—in business models, strategies, and company culture. For most managers, it’s a real paradox: how do you maintain your current targets while starting low-end ventures that don’t have predictable returns? The Innovator’s Guide to Growth shows the way—or at least a way. The authors present a clear framework for guiding this transformation.

The authors outline three larger phases in building business innovation, reflected in the first three parts to the book:

1. Indentify opportunities: Chapters 2-4 discuss customers and their activities. The authors show that segmentation is important, including identifying non-customers. Understanding jobs people are trying to get done is then the real first factor in identifying innovations.
2. Formulate and shape ideas: In this section, the authors recommend to start by focusing on ideas that solve customers’ problems or unmet needs. But also look at competitors and how the ideas and company fit into the market.
3. Build the business: The two chapters in this part focus on managing the innovation process internally, including how to form and manage innovation teams.

A fourth and final section of the book describes building the right capabilities for innovation, thus amplifying the internal transformation theme. The last two chapters discuss the institutionalization of innovation as well as implementing metrics to measure progress and success.

The Innovator’s Guide to Growth should appeal to a broad group of readers. But user experience designers, in particular, should find large parts of the books very familiar. There were many times in reading the book that I thought to myself “right on, brother” or “that’s obvious” but also “no duh.” It seems large part of innovation frameworks, such as the one outlined here, overlap with user-centered (UCD) design principles, particularly customer insight and indentifying opportunities. But shaping ideas and developing concepts are also something designers particularly good at.

UCD and innovation ultimately have the same goal: the creation of solutions that bring businesses value by solving customers’ problems. In other words, both ultimately want their innovations to be adopted.

UCD seems to focus on only part of the innovation equation, however. And really, this is a short-coming of the UCD movement in general: practitioners have, by and large, failed to tell business and system developers really what to do. This is where The Innovator’s Guide to Growth fits in: it’s not only about knowing your customers, their problems and creating solutions to address those problems, but also how to transform businesses to capitalize on innovations.

Beyond this book, there is a quickly growing body of literature around business innovation that has lots of commonalities with UCD methods. This presents a real chance for UCD and designers in general—to make a difference with our methods and perspectives and to gain status in the business world. Of course, there has been a dull rumble about “design thinking” in business literature, and there have been calls for business types to real on the left-brain thinking of creative types. But many business innovators and strategists really don’t know that the decades of UCD approaches even exist. And they are, in part, re-inventing their own methods.

We really need much more cross pollination between both sides, I believe. And it shouldn’t only be the turtle-necks reaching out to the suits: the business types should seek out designers to help them solve their business problems, particularly when talking about innovation.

A wealth of case stories make this book down-right interesting to read. Each chapter ends with tips and questions to help, making the material in the book more so practical. There are even checklists (such as the Disrupt-O-Meter on pages 155-157) and an accompanying website with downloadable spreadsheets and documents (www.innosight.com/resources). The FAQ at the end of the book is also quite practical.

The structure of the book promotes an enjoyable front-to-back reading, but the chapters can also be accessed individually and in any order. It’ll prove to be an invaluable reference source on any innovation manager’s desk. Anyone looking to implement a complete innovation program should own this book. But also, just about anyone in an organization looking to transform itself will get something from the Innovator’s Guide to Growth. It’s highly recommended.

[1] Scott Berkun, The Myths of Innovation. O’Reilly, 2007.

[2] “Voices of Innovation: Steve Jobs,” Business Week (Oct 2004): http://compuserve.businessweek.com/magazine/content/04_41/b3903408.htm

[3] Bill Buxton, The Long Nose of Innovation,” Business Week (Jan 2008). http://www.businessweek.com/innovate/content/jan2008/id2008012_297369.htm

[4] Jessie Scanion, “How Whirlpool Puts New Ideas Through the Wringer,” Business Week (Aug 2009). http://www.businessweek.com/innovate/content/aug2009/id2009083_452757.htm

[5] What If?!, Sticky Wisdom. Capstone, 2002.

[6] Clayton Christensen, The Innovator’s Dilemma. Collins Business Essentials, 1997.

[7] Mark W. Johnson, Clayton M. Christensen, Henning Kagermann, “Reinventing Your Business Model.” Harvard Business Review (Dec 2008).

[8] David Pogue, “Camcorder Brings Zen To The Shoot,” New York Times (Mar 2008). http://www.nytimes.com/2008/03/20/technology/personaltech/20pogue.html?_r=1&pagewanted=all