Get your feet off my desk, get out of here, you stink and we’re not going to buy your product
That’s what Atari told Steve Jobs in 1976 when he asked them to invest in his personal computer. Such cautionary tales may, says Paul Simpson, explain why more companies don’t innovate more often and more profitably.
If history – corporate, political, technological and human – teaches us anything it is that, as Hollywood scriptwriter William Goldman famously observed, “Nobody knows anything.”
Those three words explain why Atari boss Joe Keenan couldn’t wait to kick would-be Apple founder Steve Jobs out of his office, why movie mogul H.M. Warner famously asked, “Who the hell wants to hear actors talk?” and why Chester Carlson, the man who invented the photocopier, reluctantly decided that his idea of a pen that had a ballpoint rather than a nib was a complete non-starter.
These aren’t the kind of tales that motivational speakers sprinkle through their talks evangelising the importance of innovation. But they may explain why, at a time when more than 2,050 business books with the ‘i’word in the title are listed on Amazon, innovation isn’t soaring like a bullish stock market index. No company ever cut its way to greatness and the pace of corporate life is now so relentless – only 26% of companies in Fortune magazine’s top 100 companies in 1980 were in the same list 20 years later – that the phrase ‘innovate or fail’ has ceased to become a mantra and sounds like life-saving advice. As a buzz word, innovation is so hot it is “the new black” (as Business Week’s Bruce Nussbaum notes in his Q&A on p44), and so trendy that it made it on to the agenda for the 2006 World Economic Forum in Davos. But many companies – you might even say most – aren’t very good at it. Annual polls ranking the most innovative companies invariably feature the usual suspects – Nike, Apple, Toyota, 3M, Philips, Google – who are often associated with simple, high-profile, sexy products.
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Larry Keeley, the president of the Doblin Group, an American company that advises on innovation (his list of innovation myths is on p44), says there’s a good reason for this. “When people think about innovation, they think product. But there are other types of innovation that affect how you make money, interact with your customers, design your offerings. Truly successful companies – like Dell or Google – practice seven or eight types of innovation at once.” That is probably why many managers think spending on R&D is a guarantor of innovation. There is no right way to innovate, no sure-fire ‘how to’ manual, not even a list of seven habits of highly innovative people. But most experts agree that any company that defines innovation narrowly in terms of new product cannot maintain creativity. Serious innovation has a broader, cultural dimension. One of the most famous product wars of the 1970s – the video format battle between Sony’s Betamax and JVC’s VHS – was won not by the more innovative technology but by the company with the most creative approach to licensing.
Richard Seymour, co-founder of the design company Seymour Powell, says “Einstein observed that a problem cannot be solved from within the context in which it was created. The most intractable issues usually require a shift in viewpoint before they yield to an enquiring mind.” If, in reality rather than in rhetoric, companies see innovation as an incremental advance on the past, they may fall foul of Goldman’s rule. That’s why managers have, over the years, convinced themselves that Star Wars, automobiles and television would never catch on. To minimise such gaffes, managers need to think differently. Mat Hunt, director of design consultants IDEO, says “The best way to start innovation is with a beginner’s mind, remove your preconceptions and prejudices.” He makes the point that emerging economies like Thailand and India have realised this. Free of Western corporate prejudices, he says, “they recognise that world-class design is now the basic cost of entry into the world market.” Such seismic shifts don’t come easily, which is why Keeley and Seymour say firms should hire what they call anthropologists and others, like Hunt and Roger Martin, dean of Toronto’s Rotman School of Management, call designers.
“Groups of guitarists are on their way out.” That’s why Decca turned down The Beatles in 1962. By 1972 the group had sold 545 million records (picture: Getty Images)
What these employees are called is less significant than the fact that, Keeley insists, there is a desperate need for them. “Innovation is a new field with its own methodology, complexity and professional demands.” As Keeley is an ‘innovation strategist’, the immortal remark by Profumo scandal starlet Christine Keeler – “Well he would say that wouldn’t he?” – might spring to mind. But Keeley has statistics on his side. Most companies accept that if 4.5% of their innovations succeed they’re doing well. Is there any other field of corporate endeavour, he asks, where failing 19 times out of 20 is accepted as the norm? “Innovation is starting to give up its secrets,” he says, “and companies can increase the effectiveness of their innovation by nine to 17 times the norm if they understand the subject.” One step in the right direction, he says, is to read the literature on innovation – “most of which is based on lore and myth” – very sceptically indeed.
Where Keeley uses the ‘i’word, Martin uses the ‘d’word. For him, the message is clear: “Firms are realising that they can jump-start growth by becoming more design-oriented. But it’s not as simple as hiring a chief design officer and declaring that design is your corporate priority. To get the full benefit, you must embed design in your business, not append it onto your business.” In his article Embedding Design Into Business he identifies five cultural differences that, if ignored, will sabotage a company’s attempt to become more design-oriented.
- Flow of work
In most big corporations, this is organised around permanent jobs and ongoing tasks. Designers are more likely to work in ad hoc teams on projects.
- Style of work
Traditional corporate roles are clearly, territorially defined and individuals work away singly at their responsibilities, perfecting a task before presenting it to peers or bosses. Designers operate more collaboratively, with less rigid hierarchies, and work iteratively, prototyping rather than waiting for something to be perfect. “The architect Frank Gehry is famous for this,” says Martin. “When his first design goes public, it is typically greeted with a firestorm of protests for its inadequacies, making clients nervous because they can’t imagine he is only beginning.” Gehry is famous enough to endure the firestorm but in some firms this cultural gap can prove disastrous. Managers, presented with a prototype, judge it as if it were a final product, and decide the designer isn’t up to it.
- Mode of thinking
Many managers strive to prove through observation that something works. Others deduce, often on the basis of an engrained theory such as if we get market share first, profits will come later, what action they should take. Either way, the question “Can you prove that?” is inevitably raised and, if raised too early, is impossible to answer in the affirmative. Designers may use what some call abductive reasoning – the logic of what might be – to imagine products and services unconstrained by customer research or technical difficulties.
Sometimes, as with Herman Miller’s Aero chair, a company has to make a leap of faith. No customer could ever have described that product. At other times, says Seymour, “companies get behind a technology and push it forward like a boulder. Working out what something should be and pulling the technology towards that goal invariably works better.”
In a world of commercial over-supply, Hunt says design can differentiate a company or a product but “much more significantly, it can be used as a thinking tool to reframe commercial opportunities, to drive innovation at the most strategic level. Not just asking ‘what would make this toothpaste different?’ but ‘what should the future of oral healthcare be?’”
- The status game
In many firms, if a manager boasts about their status, they’ll specify how many people report to them or how big a budget they control. Designers are more likely to boast about problems they’ve solved through design.
- The constraint challenge
In some firms, managers see constraints – budgets, timescales – as the enemy. Designers regard them as a challenge. They magnify the problem to be solved and, ergo, the status of the designer who solves them.
Design may not be the same as innovation but the appropriate use of design can stimulate innovation. To non-designers, the idea that a discipline as opaque as design can change companies may sound like a self-serving manifesto for designers to take over the corporate world. Hunt admits that the emphasis on innovation puts the onus on design thinkers to demystify their process. But, he adds, “those who argue that design can never have a major impact on a company’s bottom line are thinking of design only in the form-giving sense. Even there, I would argue that it can help companies provide consumers with what they actually want, rather than what the companies think they want. Sounds simple, but it’s very hard to do without a designer.”
IDEO, for example, practises what it calls ‘empathic listening’. That sounds jargonistic but the emphasis on personal knowledge offers a useful alternative to the data-driven approach many firms are more comfortable with. Just because data has been entered in a database and put through a series of statistical equations devised by a PhD student, that data doesn’t become a higher form of truth.
Hunt says: “For an example of the effect of design thinking, just look at the financial results of Procter & Gamble. Their margins are increasing rapidly as they bring design thinking into the company. They are lifting themselves out of commoditisation. Design is a rich source of inspiration – if you ask it to resolve big questions, you will get big answers.”
Bigger margins, distinguishing a company or a product so that it can be sold for a premium – these are goals that the most hard-headed finance director can see the point of. Alan Lafley, president of Procter & Gamble, says: “Design, not price or technology, is the ultimate competitive advantage in the 21st century. That’s why we’ve set out to become the best consumer design company in the world. In the past, our innovation process was sequential and it usually started with a consumer insight or a technology. Where we consciously involve design at the front end, we generate more repurchase and more sales. Why? Because we delivered delightful consumer experiences. I’m not doing this because I’m a frustrated liberal arts major, I’m doing this because it’s serious business.”
Quizzing Bruce Nussbaum, innovation editor, Business Week
Why is everyone talking about innovation at the moment?
The commoditisation of knowledge has led to the outsourcing of a growing segment of the economy to China and India. There is little value left in competing on quality or cost. Innovation is the new central business value and the only way to maintain revenues and profit margins in a global economy.
What marks innovative companies out from those that aren’t innovative?
Innovative companies have innovative cultures—they think and behave differently. They innovate in all aspects of their business, from the products and services they offer their customers to their accounting and legal departments. Just as the quality movement meant improving quality in all aspects of a company, so does the innovation movement. The single most important thing a corporation can do to try to innovate is to demass and open itself up—to open source many of its functions.
Why then do so few companies behave innovatively?
The most common failing of a company trying to innovate is not replacing its CEO and top managers. Innovation must be led by people who understand it and embrace it. They must reward risk and failure. Design thinking is based on iteration—trying out ideas very quickly. Fear of failure stifles ideation and creation. So does perfection. Attempts to “get it perfect” slow innovation down.
What does the innovation boom mean for design?
Design is quickly moving to the centre of corporate culture. That’s across all markets. In advertising, innovation is the new black. Small business lags behind. But 2006 has been a tipping point for design. Firms are hiring hoards of designers and bringing design in-house as a core competence.
Does size or sector influence a company’s ability to innovate?
No. The size and market sector of a company matters much less than the age of its leaders and managers. Google is a huge company but is truly innovative.
Bruce Nussbaum believes: “2006 has been the tipping point for design. Firms regard design as a core competence”
Why innovations don’t take off
Every organisation thinks of itself as innovative. But the acid test comes when an employee suggests a new idea, no matter how large or small. Even if management try to encourage innovation, the language a manager uses when discussing an initiative may give off the wrong signals. If you hear many of these phrases around your workplace, maybe you’re not as thrusting and dynamic as you’d like to think.
- “Sounds interesting, but I’ll need a cost/benefit matrix before I can take it any further”
- “If our customers wanted something like that, they’d have told us by now”
- “That’s an interesting idea”
- “We tried something like that last year and it didn’t work”
- “I’d like to give this idea the consideration it deserves… but I’m just too busy. Remind me when I get back”
- “That market’s too big/small for us”
- “If this is such a good idea, how come nobody has thought of it before?”
- “You know, if this doesn’t work, it’ll be my neck on the line not yours”
- “For what it’s worth I’m with you, but the decision is out of my hands – it’s all down to the chief innovation officer”
- “If only you’d come to me last week; we’ve just finalised our budgets for next year”
- “Let’s park that idea until our next brainstorm – in six weeks time”
- “Our rivals know that market better than us. Why haven’t they done it already?”
Myths about innovation
Innovation guru Larry Keeley identifies six myths that stop firms being more creative
- Innovation is about creating a hot new product…
New products are soon copied and rarely enjoy sustained profits.
- Innovation comes from being creative…
It is far likelier to come from being disciplined.
- Innovation is expensive…
Failure to innovate costs more.
- Create hundreds of ideas because of high failure rates…
Fewer, bolder ideas based on your company capabilities and unmet customer needs you discover will work best.
- Financial analytics are key…
Guessing cash flow in year four for something unprecedented wastes months and is usually wrong. So why not build prototypes instead?
- Internal competency is the key driver of innovation…
Capabilities are important but the met and unmet needs of customers and non-customers are the real drivers.
Article first published in Design Council Magazine, Issue 1, Winter 2006