Rita Gunther Mcgrath | Blog | The Discipline of Strategic Growth

Ruining the innovation process - no shortage of ideas!

My post over at HBR.org on how to ruin your innovation process seems to have struck a nerve. Among other things, a whole host of people have offered their own lists of how to get innovation wrong. I was rather taken with this one, which lists four ways to mess up innovation. In summary:

failing to assign responsibilities
Fixing on ROI too early
failing to draw the right boundaries
Fragmenting your effort

We could probably do a whole encyclopedia on messing up innovation!

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Posted Rita McGrath on June 15, 2012

Five things guaranteed to mess up your innovation process

Over at my HBR Blog, I posted some thoughts on things that companies often do that mess up their ability to innovate. They include:

Innovation is episodic; and on again off again process
Resources are held hostage by the incumbent business
You try to force-fit innovation into the structure that you have
Too little diversity of thought; too little exposure to customers
Treating assumptions as though they were facts.

Click on over to the HBR site to read about these issues in more detail. Your reactions and comments are welcome!

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Posted Rita McGrath on June 05, 2012

The empty innovation mantra - way to GO WSJ!

I was practically standing on the bleachers and cheering (well, metaphorically, anyway) when I read today's piece in the Wall Street Journal, "You Call That Innovation?" Innovation has fallen victim to the same thing that happened to the word "strategy" some years back - remember "strategic procurement" "strategic human resource management" and "strategic supply chain" -- all meant to indicate that the various activities were important. But strategic? I beg to differ.

So, innovation. If you read company's annual reports, listened to their CEO's and plugged into their marketing materials, you would conclude that the corporate world is awash in new technologies, new designs, new user experiences, new business models and new ways to delight and inform us, their adoring customers. But those of us who actually work a lot with innovation, such as my good friend Scott Anthony (author of The Little Black Book of Innovation) and his mentor and mine, Clayton Christensen, grapple daily with the reality that when it comes to real innovation, most companies bungle things rather badly.

For one thing, the record of companies at driving innovation-fuelled growth, by and large, is dismal. Very few manage it as a continuous, consistent process. As I reported in a recent Harvard Business Review article entitled "Lessons from the Growth Outliers," out of nearly 5,000 publicly traded firms as of the end of 2009, only 10 had successfully grown their net incomes by 5% a year each year during that period. That's a tiny minority to have gotten the innovation thing right (if we buy the argument that innovation and growth are strongly linked).

For another, there are just too many flops, missteps and head-scratchers out there for it to be common knowledge how to get innovation right. Even very successful companies can't seem to make innovation a systematic and routine process. And believe me, the old "give people 15% of their time to do whatever they want and great innovations will happen" isn't the path forward. You need ideas, sure, but most companies I work with have more great ideas than the day is long. Thinking of stuff is not innovation. Tinkering with stuff is not innovation. Even inventing stuff is not innovation. Innovation instead, when it's done right, make us go "wow, of course, why didn't I think of that?" It creates complete experiences that we want to engage in. It eliminates inconveniences and hassles and improves our overall experiences. At its most dramatic, it creates entire categories of offerings, so new that we find it hard to name them at first.

Perhaps an example - one that isn't Apple - would be welcome. I'm very taken at the moment with a real innovation for a terribly mundane thing - the lowly household thermostat. You may have run across the company Nest, which makes a thermostat (of all things) that promises to revolutionize the category. After reading reviews of it, I couldn't but order them. It's a revelation. Like most people, I never really got the hang of programming my so-called programmable thermostats. Moreover, it seemed every time the power went out the programs went blooey. Only an engineer could love those things. The Nest, instead, is a thermostat that learns from you and programs itself. You can control it remotely. You can make adjustments on the fly. Once they master basic heating and cooling, I wouldn't be surprised if the Nest people start to tackle other things in the house that are poorly designed, clunky or just not user friendly. The alarm system, for instance. This is an innovation - harnessing technology to solve a problem in an entirely new way, with a commercial model behind it.

But what passes for innovation at most companies???? Sigh.

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Posted Rita McGrath on May 23, 2012

Social Media in the experimental business model stage

I'm getting a fair amount of buzz for my post over at the HBR site entitled Social Media, the Billion Dollar question. The basic argument I make there is that the whole social media phenomenon has some late 1990's Internet bubble characteristics that are a little disturbing from an investor/observer point of view. It's interesting that even as Facebook falls below its offering price that the other darlings of the social media world - Zynga and Groupon for instance - are also facing a decided lack of investor enthusiasm.

Social media, like many of the epic transformations that came before in the way we connect and communicate, is undoubtedly a force that will upend many of the ways we do business. What isn't clear yet is the business model that will monetize those social network connections. I doubt that it will be advertising, as the intrusion of advertising into a social mix hasn't yet proved compelling, particularly in the mobile space which is increasingly where people are doing their social media socializing. Until there's a reason individuals would lust after something they would pay money for delivered on a social site, I'm not seeing the profit streams. It's a little like Napster, which was transformative but which didn't really have a profit model behind it. In the wierd way things work, the vigorous response to Napster by the record companies and their difficulty controlling the free content eventually created the marketplace opening for Apple's music business. Not that the recording studios liked the idea of giving Apple so much power, they just liked it marginally better than the Napster "free" model.

So, speculate. Where would you pay money for social connections? As a general rule, where they provide you with access you couldn't otherwise get (LinkedIn and job hunting is a good example, with many of the functions of traditional headhunters being replaced by the information on the web site). Or where there is some exclusivity (think acceptance to an Ivy League school). Or where the information you could get goes beyond what your own ties can deliver to you. By definition, though, these things aren't part of the fabric of a highly democratic social network.

In addition, I think a lot of people are kind of over the wonderment stage of the Facebook experience. If most of what is posted there isn't all that interesting or compelling, eventually people will find other ways to spend their time. As the first adopters of Facebook now head into their late 20's, the risks of posting and sharing will rise and the thrill of just hearing from one's contacts will in all likelihood start to wane. It will be interesting to see how the network responds to a maturing, increasingly jaded, member audience.

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Posted Rita McGrath on May 22, 2012

Will Facebook’s IPO re-ignite growth in Silicon Valley?

The Facebook IPO sure has fuelled a lot of 1990’s style animal spirits among the investing community. The huge size ($100 Billion? Really?) and enormous interest in the social networking company has contributed to the belief that Facebook’s IPO will bring about rebounding growth in Silicon Valley. The money raised will presumably be reinvested in other start-ups and technology companies. People who benefit from owning shares in a company that has had a major exit event will now have funds to spend on other endeavors, some of which might involve investing in or founding other companies. The usual Silicon Valley career track is for people to gain entrepreneurial experience with one venture firm first before starting or joining another (although some – Zuckerberg, Gates, Jobs – go directly to founding, often without stopping to collect a diploma along the way). One multiplier effect is that growth in Silicon Valley can stimulate the sluggish American economy by increasing productivity; enhancing confidence; putting cash into people’s pockets and innovating new products and services that people all over the world will want to buy. Having a few sectors of the economy show great health is helpful to the rest.

In the midst of all this enthusiasm, it’s also important to remember that IPO markets are famously cyclical. Until recently, pundits were mourning the death of a vigorous IPO market (often blaming Sarbanes-Oxley). Observers suggested that a weak IPO market discouraged people from starting up regular entrepreneurial firms and VC’s from funding them since the route to a profitable exit was not clear. During the slow IPO market of the late 2000’s many VC’s folded their funds and left the industry, further constraining the ability of small businesses to get the funds necessary to grow.

It’s obviously difficult to come to an exact estimate of the impact of a given IPO, but the visibility of Facebook makes it a bellwether worth following. If the company manages the transition to public ownership with grace and continues to grow and develop, this will be highly encouraging to other firms. If it stumbles, expect a lot of “I told you so” from the chattering classes. Me, I’m a little skeptical of the business model underlying the sky-high valuation. But more on that to come.

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