Report 103

Your newsletter on applied creativity, imagination, ideas and innovation in business – delivered to your e-mail box on the first and third Tuesday of every month.

Tuesday, 3 February 2008
Issue 142

Hello and welcome to another issue of Report 103, your fortnightly newsletter on creativity, imagination, ideas and innovation in business.

As always, if you have news about creativity, imagination, ideas, or innovation please feel free to forward it to me for potential inclusion in Report103. Your comments and feedback are also always welcome.

Information on unsubscribing, archives, reprinting articles, etc can be found at the end of this newsletter.

DOWNSIZING WORKFORCE DOWNSIZES INNOVATION

Not a day goes by in which we don't hear about some major organisation laying off thousands of employees. One of our salespeople recently followed up on a prospective client who had contacted us with strong interest in our idea management product. When the salesperson called the client, he was told that the client company had just laid off 15,000 people and needed to adjust to the changes before going forward. We certainly couldn't feel sorry for ourselves over the delayed sale in view of the far less pleasant prospects that faced those 15,000 people.

Downsizing is not nice. No one likes to have to dismiss large numbers of employees and victims of downsizing are generally even less happy about the situation. Unfortunately, in a recession many companies face an unpleasant choice: downsize or die. Understandably, management usually choose the former.

To make matters worse, downsizing is usually detrimental to innovation. Yet in a recession companies really need to innovate in order to survive.

There are two key reasons why downsizing is bad for innovation. Neither is immediately obvious.

Strategic Linking

As you know, business innovation – and especially new product innovation – is almost never the result of one creative genius who sits in a laboratory inventing things. Rather, innovations are developed from the first germ of an idea, through to a developed concept and eventual product, service or process via collaboration.

Colleagues in an organisation share ideas on how to solve problems. As good ideas are identified, they are built upon in conversations, team meetings, e-mail exchanges and by using collaborative tools. Creative people seek feedback on ideas from their more analytical colleagues. Marketing people might be asked to review product ideas. Research people build and test prototypes and so on.

According to research by Dougherty and Bowman (1), new product innovation relies on “strategic linking”. People need to link not only to other innovators, but to managers who can champion their ideas, sales people who can sell the resulting products and others. Keith Sawyer uses the term “collaborative web”(2) to describe the network of links. When collaborative webs break down owing to lay-offs, employees have to start all over in building up new links.

In their study of a dozen firms, Dougherty and Bowman found a direct correlation with the extent of a firm's downsizing and the inability of people to solve strategic linking problems. The firms with the least downsizing solved 48% of strategic linking problems; the ones with the most solved only 23%.

They found that in most firms in which large numbers of employees were dismissed, management paid almost no attention to product innovation. Their advice: “To overcome the negative consequences of downsizing on product innovation, managers should support innovation sponsors and champions, and retain "old timers" who constitute the network. They should also bolster the network by building more connections among departments, and between new and established businesses. Finally, they should incorporate innovation directly into their firm's strategy. ”

I would add that management also needs to help employees build new collaborative webs. This can be done through internal networking activities; building the equivalent of marketplaces where employees can learn about other divisions and how to work with them; and bringing diverse people into meetings. Activities such as these bring people into contact with colleagues they might otherwise never meet and thus facilitates building new collaborative webs.

Unfortunately, these activities, while having substantial long term pay-off, are unlikely to be seen as productive in the short term. Employees themselves will be reluctant to do anything that might be perceived as non-productive and middle managers will be equally unenthusiastic about sponsoring such activities. Thus senior managers must make clear the long term benefits of networking to build new collaborative webs.

Indeed, as a senior manager, it is absolutely critical that you minimise disruption of the creative web, provide methods for rebuilding webs and stress the value of those webs as well as the importance of time spent on networking. Your company's innovativeness depends on it!

Broken Trust

Research on innovative companies often demonstrates that trust is a critical ingredient. If employees trust each other, trust their managers and trust their brand, they are more than willing to risk being creative and building ideas that can turn into innovations. They do not fear that they will be reprimanded if an idea does not pan out. They are not worried about managers stealing credit for their ideas and they know they will not be laughed at for making an outrageous suggestion.

Unfortunately, lay-offs have an unpleasant tendency to destroy trust. Employees are no longer sure if they have a future in their company. They begin to worry that time devoted to developing a creative idea might be perceived as time wasted. They worry that if they do not demonstrate productivity, they will be in the next batch of dismissed colleagues. They worry that more desperate colleagues might steal their ideas. And that all kills trust.

And once this trust dies, people spend less time trying to be more innovative. They keep ideas to themselves and avoid rocking the boat. And that is not good for innovation.

Again, it is up to management to stress the increased importance of innovation to the firm and encourage time spent on innovative projects. Indeed, management should explicitly state that time spent on innovative projects is considered productive time.

It is also important to bear in mind that if the focus of your company's innovation strategy is going to change, this should also be communicated to employees. It is understandable that management may want to focus innovation on quick to market ideas rather than long term projects that might not pay off in five years. If so, employees need to understand this new focus so they can support it.

The Best Solution

Of course, the best thing you can do for the innovative future of your firm is not to downsize. But when you have no other option, then it is critical to keep innovation in mind when planning your downsizing.

References:

(1) Deborah Dougherty and Edward H. Bowman (1995) “The effects of organizational downsizing on product innovation.” California Management Review, Vol. 37 No. 4, Summer issue

(2) Kieth Sawyer, “The Downside of Downsizing” (2008) CREATIVITY AND INNOVATION (Blog) http://keithsawyer.wordpress.com/2008/11/14/the-downside-of-downsizing/

RISK REDUCTION IN INNOVATION

Very creative ideas can and often do become highly profitable innovations. But they can also turn into costly failures. A well thought out idea review process can help you identify those creative ideas which are most likely to become profitable innovations.

Assuming you have, or intend to build, an effective idea generation process – such as via an idea management system – it is wise to create a multi-stage review process that allows you to handle large numbers of ideas efficiently. More importantly, a good review system reduces the risk in implementing innovative ideas by enabling you to better identify the ideas most likely to succeed.

A Quick Note on Idea Generation Methods

Before looking at how to review ideas, it is important to look at how you acquire the ideas in the first place. If you are using an open suggestion scheme (in other words a suggestion box with no focus on what kinds of ideas are submitted), you should seriously consider using ideas campaigns or a similar method based on Creative Problem Solving (CPS).

An ideas campaign is based around an innovation challenge, such as “in what ways might we improve product X's ease of use?”. People then respond to the challenge with ideas.

As a result, you capture multiple related ideas that aim to solve your specific business problem. This makes it easier to...

• Combine complementary ideas in order to make better, more powerful solutions.

• Comparatively evaluate ideas, thus enabling you to identify the best solutions – or solutions – to your problem.

So, let's assume you have just run an ideas campaign on a business problem and have received lots of ideas from employees.

Quick and Dirty Elimination Review

When you have a lot of ideas to review, you almost inevitably need to perform what I like to call a “quick and dirty elimination review” (Q&DER). A Q&DER is a pass/fail test for each idea. It enables you to whittle down your massive collection of ideas to a more manageable number. Since, evaluating ideas requires staff time, the more effectively you can fail ideas that will never work, the more efficiently you use the time of your experts to review promising ideas. Nevertheless, you need to be careful not to fail ideas with hidden potential.

With Q&DER, it is important to have some kind of criteria or test to determine whether or not each idea passes. This might be a budget restriction, an issue of timing or something else. However, read the Report 103 article on “Cleaning up Quick and Dirty Idea Reviews” in the 16 September 2008 issue at http://www.jpb.com/report103/archive.php?issue_no=20080916 This article looks at potential flaws in badly designed Q&DERs.

On final note: any outrageous idea should automatically pass the review irrespective of whether or not it meets your Q&DER criteria. The most outrageous ideas are also often the most creative and hence have the potential to become breakthrough innovations. Such ideas may need more work to implement. But their potential pay-off is so great that they absolutely MUST BE PASSED.

Evaluation Matrix

With the failing ideas out of the competition for implementation, the next step is a more structured evaluation matrix. Ideally this should be done in the form of a peer review where several experts look at each idea and rate it against a set of five criteria. Depending on how well an idea meets each criterion, it gets a score of 0-5 points. The evaluators scores are averaged and as a result, you get a set of metrics for comparing the extent to which an idea meets your business needs.

As a system for efficiently testing an idea's potential, an Evaluation Matrix cannot be beat. It is far more effective than voting (to understand why voting is the worst possible method of idea review, read Innovation Is Not Democratic in the 20 May 2008 issue of Report 103: http://www.jpb.com/report103/archive.php?issue_no=20080520). It does not take long for experts to analyse an idea against a criteria set and such a objective approach avoids prejudice which often causes people to reject highly innovative ideas.

Developing the Idea into a Concept

Ideas which get a suitably high evaluation score need to be developed further and tested for viability. Where possible, I prefer the development of a prototype. And the more innovative an idea is, the more effective a prototype will be in demonstrating the idea's quality to managers, customers, shareholders and others who need to buy into it.

For more service oriented ideas, a business case is a more typical approach. A business case is basically an argument for implementing an idea. It argues for investment and resources and attempts to demonstrate that the project will earn a sufficiently good return on investment (RoI) of the appropriated budget and resources.

And Then

At this stage, you should have a clear idea of your idea's potential and can make an educated business decision whether or not to go forward. If you do go forward with a breakthrough innovation, it is wise to set a series of milestones for evaluating its implementation (see http://www.jpb.com/report103/archive.php?issue_no=20060606). This enables you to ensure the idea is living up to its potential. And if it isn't, you can stop it and start on another innovative idea.

GET INNOVATIVE WITH YOUR VALUE PROPOSITION!

Macy's, a major upmarket department store retailer in the USA has recently laid off 7,000 people. Patricia Edwards, a retail analyst at Storehouse Partners, notes that the company has been unable to respond to the growing demand for cut-price goods in the USA. She remarked: "The retail environment has changed so much. They have not been competing on a value proposition and this is a value market," she said.

She's right, of course. This is a value market and everyone is looking for added value in their purchases. This is just as true of consumers as it is of businesses. But so many businesses have become so concerned with their own well being, through staff reduction, closure of facilities, cost savings and other activities, that they neglect to note that their customers are doing the same thing.

You Need to Review Your Value Proposition

How about your firm? If you have not reviewed your value proposition in the past few months, you need to do so now. But don't just attach some trendy words to it. Rather use creative problem solving (CPS) methodology in order to develop an innovative value proposition that your customers will embrace.

Let's look at Macy's. They are an upmarket retailer selling a variety of goods – and they have been doing so since 1929. Hence, I doubt that trying to compete with Walmarts on price would be a viable value proposition for the company. Doing so would damage their reputation once the recession has past and meanwhile they would certainly not be able to profitably cut prices to the same extent Walmart does.

Added Value Is Not the Same as Reduced Prices

But value conscious people are not simply looking for the best price for a product. Rather they are looking for the greatest value for their money. If a $50 shirt is demonstrably better that a $25 one – perhaps because it is better made and so will last longer or is more likely to impress a potential employer or is easier to clean – there will be a market for it. But it is important that customers understand the added value they get for the added dollar.

Of course it is one thing to shout about better quality, longevity and that kind of thing. But quite another to develop and deliver on an innovative value proposition that convinces customers of that added value.

But it can be done. So, what are you waiting for? Bring together a diverse team that includes people from every division of your company – and ideally some customers and business partners – and use your best creative skills to devise, develop and define your new value proposition for 2009.

And if it is a really innovative one, why not share it here on Report 103? We'd love to read it!

JENNI IDEA MANAGEMENT

Idea management is probably the most efficient tool for managing your innovation process, from idea generation to implementation. And Jenni idea management is simply the best tool for the process.

Jenni's structured ideas campaign approach to idea management ensures that your people are generating and developing ideas that meet your current business needs.

Jenni's evaluation suite provides tools that enable you to efficiently review ideas in order to identify the most viable ideas. This substantially reduces the risk of implementing highly innovative ideas.

And Jenni's unparalleled support system means that we are ready and waiting to help you succeed at every step of your innovation process. And if it doesn't work – you can simply cancel your Jenni contract with just 30 days notice.

Best of all, Jenni's low cost and ease of use mean that it pays for itself in no time. Use Jenni for generating cost cutting ideas, value proposition ideas and new product ideas in order to generate a sustainable series of innovations that reduce your operational costs AND increase your income.

What are you waiting for? Check out http://www.jpb.com/jenni/ or contact your nearest Jenni representative http://www.jpb.com/jenni/contact.php to discuss your needs.

SELLING AND SERVICING JENNI

If you run an innovation consultancy or training business and would like to be able to offer Jenni (http://www.jpb.com/jenni/) to your clients, contact us and introduce yourself. Jenni is sold and service provided to clients through a global network of small, friendly and highly professional innovation shops. If you help firms innovate better and believe in fast client service, we would like to hear from you!

LATEST IN BUSINESS INNOVATION

If you want to keep up with the latest news in business innovation, I recommend Chuck Frey's INNOVATIONweek (http://www.innovationtools.com/News/subscribe.asp). It's the only e-newsletter that keeps you up-to-date on all of the latest innovation news, research, trends, case histories of leading companies and more. And it's the perfect complement to Report 103!

Happy thinking!

Jeffrey Baumgartner

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Report 103 is a complimentary twice monthly electronic newsletter from Bwiti bvba of Belgium (a jpb.com company: http://www.jpb.com). Archives and subscription information can be found at http://www.jpb.com/report103/

Report 103 is edited by Jeffrey Baumgartner and is published on the first and third Tuesday of every month.

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