Monthly Archives: March 2012

Relentless Innovation, A Review: Part III: All Hail the Middle Manager!

In Part I, we began our review of Jeffrey Phillips‘, VP Marketing of OVO Innovation, recently published book on Relentless Innovation — a guide for transforming your organization from one that innovates occasionally, at best, to one that innovates constantly — by reviewing some astutely pointed out innovation myths, the biggest barriers to innovation in an average organization, and the problems with the average organization today. Then, in Part II, we discussed what a relentless innovator is and some of the characteristics that define a relentless innovator — characteristics any organization that wants to be a relentless innovator is going to adopt.

Today, we are going to provide the roadmap for an organization that wants to be a relentless innovator.

Step 1: All Hail The Middle Manager

I know that it’s probably sending shivers up and down your spine, as it did mine the first time I got the message, but the reality is that while a middle manager can be the biggest barrier to innovation, she can also be the biggest instigator of innovation. A middle manager who is:

  • comfortable with change and uncertainty
  • full of foresight (with the understanding that an unmet need is an opportunity)
  • thorough and well-prepared
  • participative
  • endowed with persuasiveness, persistence, and discretion

can be the biggest asset an organization has where innovation is concerned. Such a middle manager who is driven to innovate will drive that commitment and vision through the ranks and help make innovation-as-usual part of the modus operandi of the organization.

Step 2: Balance Efficiency and Innovation

Since not all innovation efforts will pay off in the near term, and since the vast majority will not pay off in the quarter (or current fiscal year), the organization needs to balance efficiency — which defines the revenue generation activities off of the current products and services — with innovation and give each the appropriate weight and focus so that the organization thrives today and tomorrow. How does an organization achieve this balance?

Start with a focus on innovation at the top; embrace the proper tools, techniques, and methodologies — broadly; consider innovation as a (future) revenue opportunity; become more “plastic” (open, flexible, and nimble); adopt a rapid experimentation methodology; remember that patience is necessary; and have a Cortes Moment — scuttle your ships and leave your conquistadors no option but to move ahead with innovation.

According to Mr. Phillips — that’s it. And if the organization does it right, everything changes. Innovation tools and techniques are deployed across the organization and brought to bear on new challenges first, not last. Managers expect and anticipate innovation. The organization stops fighting fires and starts lighting fires under the competition with new, innovative, product and services the competition did not expect. Middle managers are the biggest assets. And the firm achieves an “innovation flow”.

Relentless Innovation, A Review: Part II: The Relentless Innovator

In Part I, we began our review of Jeffrey Phillips‘, VP Marketing of OVO Innovation, recently published book on Relentless Innovation — a guide for transforming your organization from one that innovates occasionally, at best, to one that innovates constantly — by reviewing some astutely pointed out innovation myths, the biggest barriers to innovation in an average organization, and the problems with the average organization today.

Today, we will move on to defining what a relentless innovator is and how an organization can get on the right path to becoming a relentless innovator. So what is a relentless innovator? Simply put, an organization that pursues innovation relentlessly. What defines a relentless innovator? Good question.

One of the first things that Mr. Phillips points out is that most relentless innovators share almost nothing in common other than their ability to innovate consistently over time. In fact, the only thing most relentless innovators (Apple, 3M, W.L. Gore) share in common is an operating model fine-tuned to innovation and employees that are passionate about innovation (as well as deeply experienced in one or more areas of expertise and the application of such area of expertise to innovation). The IAU, Innovation As Usual model employed by these firms is organized around a workflow that is built on a (core) innovation team where the roles and responsibilities of every member are well defined.

Furthermore, all of the following necessary components for innovation are present at these firms:

  • A competency and culture aligned to innovation goals.
    Sight of innovation is never lost.
  • A core innovation team.
    This team is the innovation Center of Excellence and maintains the core process and knowledge base that is shared throughout the organization.
  • Central innovation method or process.
    Each individual project applies, and extends as necessary, this process.
  • Innovation skills and constant innovation methodology improvement.
    The team knows how to apply the process, and improve the process when the opportunity presents itself.
  • Idea Management Software
    No good idea is ever lost!

Furthermore, the innovation model defines innovation as:

  • a broad undertaking (not just product or service centric)
  • a core persistent capability
  • a common business practice for everyone
  • a core component of strategy
  • a process to be continually refined
  • a constant search for new ideas
  • a way of life

The innovation model is a framework for the operating model of the organization. This eightfold operating model (as defined in detail in chapter 7) provides the foundation for the communication, skills development, evaluation framework, and rewards which, ultimately, determine if any innovation effort is gong to be successful or not. These factors — which define the culture, business attitudes, and focus around innovation — are completely under an organization’s control and that’s why, when it comes to innovation, an organization is ultimately the master of its own destiny — no solo visionary, rebel employee, or lucky charm required. (Relentless) Innovation is a strategic choice, not an act of faith, and one that can succeed with the right framework and support.

So now that an organization knows that (relentless) innovation is in its reach, how does it get there? That is the subject for the third, and final, part of our review.

Are You Revenue/Growth Enabled? Take This Hackett Group Survey and Find Out!

Today, the Hackett Group released their latest study — the Revenue Growth Enablement Study. The goals of this study are to determine in what ways a Procurement organization can enable revenue/growth scenarios for the organization as a whole, how far an average organization is down the revenue/growth enablement path, and what practices leading organizations are using to enable revenue/growth. Given the burning need for leading Procurement organizations to not only do more with less, but contribute to the top and bottom line in even more ways, this is an important study. For Procurement to earn, and keep, that seat in the C-Suite, it has to continue to deliver value year-over-year. And the best way to deliver that value, once it has trimmed costs, is to help the organization grow (with its expertise in operations management), globalize (with its expertise in foreign markets) and increase revenue (with its expertise in logistics, multi-stage and multi-channel inventory management, and new product introduction [NPI]).

Not only will this study give you ideas on how to identify growth priorities, tactics to support those priorities, metrics to measure success, NPI, and support sales and marketing, but it will qualify you for the full study results and final report when the study is complete. And in the meantime, you get one of the following five reports free upon survey completion:

  • 2012 Procurement Key Issues Study
  • Category Management – Beyond The “Strategic” in Strategic Sourcing
  • Supplier Relationship Management (Part I: Tapping the Power of Top Performance in SRM)
  • Defining & Expanding the Value Proposition of Purchase-to-Pay
  • A New Procurement for a New Normal

The 2012 Procurement Key Issues Study identifies the top 10 issues for Procurement organizations in the coming year, with the acceleration of revenue growth leading the way. (That’s why this study is so important.) It also discusses some key strategies for enabling profitable growth, including globalization — which will nearly triple within three years, as determined by the Hackett Group in their “Globalizing Procurement’s Service Delivery Model, Not Just the Supply Base”. (For some key stats, see SIs recent post on The Global Agenda — It’s Coming!.)

The study on Category Management, which attempted to go beyond the “strategic” in strategic sourcing, found that despite the additional savings opportunities that can come from category management (as chronicled by a number of Procurement leaders in Hackett’s conferences last year and by leading sourcing platform providers like BravoSolution), only 5% of companies have a category-focussed strategic sourcing process that is very well implemented or truly strategic. The majority of companies pursuing strategic sourcing (54%) are just average with a process that is fairly well implemented, but which does not push the boundaries. The report, which clearly defines the difference between a standard strategic sourcing approach and a category management approach, takes a deep dive into category management objectives and strategies, the supply management service line it enables, and provides a strategic category management framework that can jump-start an average organization looking to take it to the next level.

The study on Supplier Relationship Management, the first in a series, is extremely insightful on the importance of good SRM which is not just foundational for sourcing success, but transformational from a value viewpoint. It was found to increase cost savings / avoidance in top performers by almost 80% and growth-related benefits by 53%! SRM drives almost 45% of total Procurement value in top-performers! This is a level of improvement not achievable by any of the Top 10 Technologies for Supply Management on their own or even combined in a pair! Only collaborative sourcing, which embraces supplier relationships, can reach this level of value. The paper also identifies key differentiators of top performers and a model for SRM success that you can use to jump-start your organizational effort.

I haven’t reviewed the last two papers, but Sunday’s post pointed out how the UK Government expects to save £40 Million a year just by paying SME construction suppliers directly through P2P. P2P is full of opportunity, and I’m sure this paper will provide deep insights that can be used to jump-start an initiative. Finally, while There Is NO New Normal … Just the Old Normal Coming Back, there is a need for New Procurement Technology to cope with the return of an Old Normal that had passed before such technology hit the scene, and if any research organization is going to nail what that technology is going to be on the head, it’s the Hackett group.

To take the the Revenue Growth Enablement Study (enabled by their new, interactive, Qualtrics tool), and get your free research (and make your organization better for it), join the World Class Procurement LinkedIn Group.

Relentless Innovation, A Review: Part I: Setting the Stage

This is Part I of a review of Jeffrey Phillips‘, VP Marketing of OVO Innovation, recently published book on Relentless Innovation, his guide for transforming your organization from one that innovates occasionally, at best, to one that innovates constantly.

Before we get into the core of what relentless innovation is, or why your organization needs it, we’re going to set the stage by reviewing the astutely pointed out innovation myths, the biggest barriers to innovation in an average organization, and the problems with the average organization today — as detailed in the first four chapters of the book.

According to Jeffrey, some of the biggest myths in innovation that pervade an average organization, and prevent it from being relentlessly innovative, are the following:

  • Individual, innovative leadership accounts for the majority of a firm’s success.
    The truth is that sustained innovation goes beyond visionary leaders (who are often a one- or two- trick pony).
  • The level of industry competition dictates the amount of innovation (required).
    Industry competition might foster innovation, but it doesn’t guarantee innovation (leadership).
  • It is possible for firms to copy the product or service offerings of market leaders while retaining competitive advantage through low costs or higher service. There are a host of problems with this fast follower mindset. First, it’s not always possible to be fast enough in markets where products have life-spans of a year or less. Second, the more one follows, the less one leads, and the less likely one will be able to innovate. Third, the lack of (time for) market research prevents a following organization from differentiating what features make the market leader’s product or service attractive. Fourth, by the time the product gets out, a majority of market share could already be gone!
  • Due to changes in a globalizing world, no firm can sustain innovation leadership over the long term. The truth is that the primary drivers of sustained innovation are under an organization’s control.

But more importantly, the biggest barriers are the BAUMMs (pronounced Bombs) that are present in every organization — the Business As Usual mindset and the Middle Managers. Yes, those dreaded middle managers that everyone says you should right-size as soon as possible as they aren’t leading and they aren’t delivering products or services. (But, in fact, you shouldn’t really right-size them, just put them in the right mindset, but we’ll discuss this in a subsequent post.) These two barriers are the worst because they dictate what work is done, and how such work gets done. (Sustained) Innovation requires that the right work be tackled in the right way — so it’s natural that a BAU mindset that dissuades innovation in the hands of risk-averse middle managers is the best way to guarantee that innovation does not occur in an organization. Furthermore, any attempt to force-fit innovation into a BAU model that was not designed for innovation will fail.

The worst thing about a BAU that dissuades innovation is that any action that delays innovation starts and continues a viscous cycle that will delay innovation until the organization is on the verge of bankruptcy, obsolescence, or both.

So why are Middle Managers the biggest threat to innovation in a traditional organization? They have the most at stake when a threat emerges to the operating model that they are compensated against. If they miss their metrics, they will lose money in the best case and their job in the worst case. So they will look to squash any effort that is not 100% in line with the business-as-usual mindset that, generally, promotes efficiency, cost-reduction, and risk-minimization — three factors innovation projects in an early stage generally do not possess.

And innovation is desperately needed in an average organization. As Jeffrey reports, in 2010, a survey found that while CEOs consistently ranked innovation as one of their top three priorities, less than 25% of manufacturing organizations in the US innovated a new product in the last three years and less than 8% of service organizations innovated a new offering in the last three years! The fact that only 1 in 4 manufacturing organizations can innovate a product in 3 years and that only 1 in 12 service organizations can innovate a service offering in 3 years is telling!

Presumably more than 1 in 4 tried, but failed. Why? Probably for one of the following four reasons outlined by Mr. Phillips:

  • Poor strategy communication.
    This dooms just about any project to failure.
  • Lack of resources.
    Innovation does require enough resources to get the job done.
  • Demands for quarterly results.
    Not all projects finish within the quarter, or even the year. Sometimes a big up front investment is needed for a huge payout later.
  • Fear of uncertainty and risk.
    Aggressive innovation projects can present some of the biggest risks an organization faces internally.

And even those that succeeded probably couldn’t reliably replicate the effort because:

  • There was no plan.
    A plan that says what the organization will, and won’t do, is needed to keep things on track.
  • Not enough time was allocated to (the) subsequent project(s).
    Innovation not only requires enough people (who must be dedicated to it) and resources, but enough time to get the job done.
  • A Project Mindset was applied.
    As a result lessons learned that could be applied to other innovation efforts are not documented and lost.
  • A Control Focus was maintained.
    Middle managers try to “control” the project as they would a manufacturing project to “minimize” risk and, in fact, do the exact opposite!
  • The effort was too isolated from business as usual.
    While skunkworks sometimes works (when the team is dedicated 100% of the time and given all of the time and resources they need), it generally doesn’t. Support is typically required for success.
  • The innovation effort was outsourced.
    This is a crapshoot.

In other words, innovation is rare and relentless innovation, a trait Jeffrey claims is going to be necessary for organizations to survive in today’s ever-changing marketplace, is rarer still. So what can an organization do? That will be the subject of Part II.