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If You Can Think It, You May Want to Ignore It

Published date: January 18, 2016 в 3:00 am

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Imagine you and your colleagues are sitting at a meeting listening to a proposal from one of your suppliers. It’s an interesting proposal about a new innovation that can help you and your team. You have first rights to the new concept before they shop it around to your competitors.
But something is bothering you. You remember reading a story in the newspaper just last week about a company that tried something new. It invested too much time and money in a new concept. Then their business turned bad, people lost their jobs, and the company went out of business. The local community was devastated. You recall vividly how it ruined many families.
Even though your supplier showed solid evidence for the innovation, you decide to pass on it. They take it to a competitor who scoops it right out from under you.
So what happened? You may have been a victim of a cognitive bias called availability.
The availability heuristic is a mental shortcut that occurs when people make judgments about the probability of events by how easy it is to think of examples. The availability heuristic operates on the notion that, “if you can think of it, it must be important.”
Using the availability heuristic, people judge the probability of events by the ease with which instances could be brought to mind. We believe an event to be more likely to occur if we can think of more examples of that event.
It also has another affect on our judgements. The easier it is to recall the consequences of something, the greater in magnitude we perceive these consequences to be.
We tend to rely heavily on more recent information. We are especially affected by vivid, unusual, or emotionally charged examples. So we make those memories more important, and we make bad decisions based on them.
To avoid availability bias, keep these pointers in mind:

  • When making important decisions, pause and think why you are deciding as you are. Is it because of information you have recently received? Who gave it to you? Why did they give it to you?
  • Do new research as though you knew nothing about the situation. Start from scratch and try to ignore what you know about a situation. Assume it’s not trustworthy. What you know about a situation is likely to be a tiny fraction of what you need to know.
  • Realize that you are drawing on recent or vivid events, and you are not able to draw up facts and experiences that you have not be exposed to.
  • Look for the mundane contrary examples to what you are considering. Are you being overly focusing on dramatic cases rather than common cases?
  • Ask for opinions from others, especially from people who tend to have opinions different than yours. You need to get new perspectives.

Be wary of things you learn in the media. Just because something is reported in the newspaper does not make the event more likely to occur. In fact, it’s usually just the opposite. The media likes to report things that are bizarre and highly unlikely. Don’t rely on these events as evidence for doing or not doing something.
I know it’s counterintuitive, but you’ll make better decisions and show better judgement if you downplay what you already know about a situation. It goes along with the old saying, “It’s not what you don’t know that will get you; it’s what you know that ain’t so.”

Great Innovators Embrace Resistance, Not Fight It

Published date: January 4, 2016 в 3:00 am

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Imagine your marketing team comes up with an idea for a great new product. You absolutely love it. But when you start shopping the idea around the building, you get some very strange looks from people. People are resisting the idea, and you and your team are getting frustrated. Resistance to innovation is a natural phenomena in companies, and it can become a huge challenge unless you manage it correctly.
Why do people resist new ideas? As you’ll see in a minute, there are lots of reasons. But before I dive into them, let’s first understand that resistance is necessary. That’s right. Necessary. Here’s why.
First, innovation and resistance cannot be separated. In a real sense, they help define each other. After all, something’s not really innovative unless it meets with at least some resistance. Think of resistance as a gatekeeper. All adoption of new ideas starts with resistance, and think of resistance as an important filter to get to the best ideas.
That said, it must be addressed if progress is to happen. You, as the leader, have two important roles to play. First, see yourself as a Resistance Maker. When new ideas are brought to you, it’s okay to question it, bring up challenges, and so on. But you also have to serve as a Resistance Breaker, someone who works within the company to knock down the barriers and cause adoption of the new idea. Let’s understand the sources of innovation.
Resistance comes from three domains: characteristics of the innovation itself, characteristics of the resistor/adopter, and characteristics of the innovator, meaning you or the person selling the idea.
By characteristics of the innovation, I mean the factors of the idea itself that make people resist it. For example, what value does it bring, how risky is the idea, how compatible it is with your current products and services? Can the idea be tested, preferably in stages, and can we back out it if needed? How complex is the idea, and can it be communicated clearly? Sometimes people resist ideas because they just don’t get it. Finally, is there flexibility to change the idea, how long will it take to realize the benefits, and will the idea have some unintended side effects on other projects? In the exercise files for this course, you’ll find a handy checklist and definitions for all of these factors.
Resistance can also arise because of certain personality traits of the resistor/adopter. I call them that because we all start as resistors to a new idea, even if just a tiny bit before adopting it.
These traits include how much they perceive the benefits and risks, how motivated they are to change, and their attitude and experience with previous innovations. If they had a bad experience with the last idea, they’re going to be more resistant to the next one. Another trait that can affect how reistive they are is their own ability to generate highly creative ideas. The poorer they are at innovating, the less likely they’ll be open to new ideas.
Resistance can also arise depending on who you are as the person selling the idea. If you’re seen as credible and as someone who explains ideas clearly and informatively, you’ll meet with less resistance.
Your job as the Resistance Breaker is to understand the strongest sources of resistance and to find ways to lower the effect. Don’t try to tackle every source, just the ones that matter and that can be changed. If you do, you’ll find that next great idea winning in the marketplace.
To learn more, read Resistance to Innovation: It’s Sources and Manifestations (University of Chicago Press, 2015) by  Shaul Oreg and Jacob Goldenberg

Eight Years of Blogging at Innovation in Practice

Published date: December 21, 2015 в 3:00 am

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This month marks the eight year anniversary of Innovation in Practice. As always, I want to thank my many readers and supporters who follow it.
When you start blogging, you’re never quite sure who will read it and continue reading it. A fellow innovation blogger told me not to worry about. “Blog it, and they will come,” is what he said. In essence, readers self-select based on their interest in the topic. I can’t control it.
That said, I’ve learned a lot in the last eight years, and I see predictable patterns in the types of people who find me here and contact me about speaking engagements. They are:

  • Strategy/Innovation Leaders: executives who are looking to make transformational change in their business
  • Technical/R&D Leaders: executives who are driven to fill their product pipeline
  • Commercial Leaders: marketing executives who need to strengthen their franchise vis-a-vis their colleague’s franchises
  • HR/Leadership Training Leaders: HR executives or consultants who want to embed innovation in their programs
  • Meeting Planners: people who source talent for a wide variety of programs

My goal is to make this blog different from other innovation blogs and websites. Instead of focusing on why innovation is important, I focus on how innovation happens.  The themes of this blog are:

  • Innovation can be learned like any other skill such as marketing, leadership, or playing the guitar.  To be an innovator, learn a method.Teach it to others.
  • Innovation must be linked to strategy. Innovation for innovation’s sake doesn’t matter. Innovation that is guided by strategy or helps guide strategy yields the most opportunity for corporate growth.
  • Innovation is a two-way phenomena. We can start with a problem and innovate solutions. Or we can generate hypothetical solutions and explore problems that they solve. To be a great innovator, you need to be a two-way innovator.
  • The corporate perspective, where innovation is practiced day-to-day, is what must be understood and kept at the center of attention. This is where truth is separated from hype.

I’m expecting 2016 to be another strong year in terms of keynotes, workshops, and training programs. My marketing and PR team are going to completely re-position the “Drew Boyd” brand in terms of a new website, design, and messaging. It’s an exciting project, to be launched in the first quarter.
The book, Inside the Box, is now in fifteen languages and continues to sell well globally. As of now, I have three additional book projects lined up with some amazingly-talented co-authors. Four more video courses will be added to my lynda.com lineup. Now that LinkedIn owns lynda.com, the viewership of my courses has skyrocketed.
And the biggest news for 2016 is…the launch of our new web app – Innovate! Inside the Box, a software tool that helps you use the SIT Innovation Method. Today, we have an iPad version of the app, but this new app will be browser-based so you’ll be able to access from any Internet-connected appliance. STAY TUNED!
I want to thank Jacob, as well as Amnon Levav, Yoni Stern, and the entire team at SIT LLC. I thank Marta Dapena-Baron at Big Picture Partners, Bob Cialdini and the team at Influence at Work, Yury Boshyk at Global Executive Learning, the Washington Speakers Bureau, the team at Lynda.com, Jim Levine, Emilie D’Agostino, Shelley Bamburger, the team at Wordsworth Communications, and my fellow faculty at the UC Lindner College of Business.
Drew

Can you learn to be more creative?

Published date: December 14, 2015 в 10:10 am

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by Todd Bookman (with permission)
First, a definition.
“So my definition would be, in order for a certain idea to be creative, it must possess two major components. One, it has to be new, novel, something we haven’t seen before,” says Rom Schrift, a marketing professor at the Wharton School of the University of Pennsylvania.
“But it also has to be useful. So, if it is just something new, but doesn’t offer any benefit, it is not necessarily a creative idea.”
This semester, nearly 300 students are learning how to crank out more creative ideas in Schrift’s class titled “Creativity: Idea Generation & the Systematic Approach for Creativity.” It’s part of a growing field that treats problem solving as an academic discipline, complete with competing theories for what approaches produce the best results.
A page from Dr. Seuss
During lectures, Schrift bounces around the classroom, white sleeves rolled, preaching the gospel of creative thought. But if you think his mantra is as simple as ‘think outside the box,’ it turns out it is the exact opposite.
“The problem with this phrase is that, in most situations, we don’t know what the box is,” says Schrift. “What is the box? If we cannot define the box, how can we think outside of the box?”
According to Schrift, the core of learning to be creative is recognizing what the box actually is. What are the components and structures that make up the problem you are trying to solve, and what tools or attributes are at your disposal? Knowing what these constraints are, he argues, makes it easier to produce creative solutions.
“Actually inside the box, there are a lot of opportunities, and most of the creative ideas, if anything, they come from inside the box.”
Schrift uses an example from none other than Dr. Seuss to make his point.
“Dr. Seuss and a friend had a discussion about the shortcomings of using books to teach first graders how to read. And so his friend gave him a bet,” he says.
The challenge was simple: there were 350 unique words that first graders were expected to understand, and Seuss was to write a book using just 225 of them, and nothing more. Those, says Schrift, are his constraints.
“He used these constraints, right? He could not use any words, but there was a specific bank of words, and he came up with The Cat in a Hat.
“His publishers saw this, they said, interesting…let’s have another bet, another challenge, and he challenged Dr. Seuss to write another book using only 50 words, and he wrote Green Eggs and Ham.”
“You could argue, sure, Dr. Seuss is an extremely creative individual, and I agree, but there is something about imposing these constraints that maybe helped him be more creative. And this is kind of the approach we are teaching.”
Creativity on demand
Schrift’s class isn’t exactly Wharton’s version of “Rocks for Jocks.” During the semester, students learn different methods for approaching creativity with head scratching titles such as “The Attribute Dependency Template” and the “Task Unification and Closure Principle.” There’s a hefty reading list, as well as a major group project where students take on a real-world problem in partnership with a major company.
“I think I’m definitely more creative than I was before because I just can just think about it in a different way,” says Nicole Granet, a senior majoring in management. “I don’t feel like I need to just close my eyes, listen to some relaxing music, maybe something will come to me. I feel like I’m much more in control of being able to produce these ideas that can really make a big change…sort of be ‘creative on demand.'”
Granet is starting a job in consulting after she graduates, where, ideally, she’ll help companies be more productive, and creativity ‘on demand’ will definitely be an asset.
Gerard Puccio hears from employers all the time about how much they value that type of skillset. Puccio directs Buffalo State’s International Center for Studies in Creativity, which, in the late 1960s, became the first school in the country to offer classes on the subject.
He says the discipline has evolved over the years as the challenges we face have become more complex.
“Life has become much more complicated, and as a result, we need to enhance the level of complexity of our own thinking, to be able to deal better with complex problems…problems that don’t have easy answers,” says Puccio.
He adds that many of these creative skills are actually innate, and perhaps just need a little coaxing.
“It is a human characteristic. It is the reason why we’ve survived through the millennia. It is because…our competitive advantage is creative thinking. We are not the fastest, we can’t fly, we don’t naturally camouflage ourselves, we can only exist in certain climates. So, the human species has evolved to be creative, and in fact, that’s what has helped us to sustain ourselves over time,” says Puccio.
Design it out
Some of us, of course, are still going to be more creative than others.
Example #1: David Ludwig.
He’s a celebrated classical composer and a member of the composition faculty at Philadelphia’s Curtis Institute of Music, one of the nation’s top schools. He’s the type of guy who gets inspiration for melodies walking around the grocery store. But even with all of his innate ability, Ludwig is completely on board with the idea that creativity can be thought of as a skill to hone, and that understanding constraints and attributes is crucial to creating something new and useful.
“We start out very often with a commission,” he says, “and what I do is, I start making my own constraints. What is the piece about? What motivates it? Why is it meaningful? Then we go from there. We start with the biggest questions first, and go to the smallest.”
Ludwig says he often gets his students thinking about how best to approach creation of a new work by using a simple exercise.
“If I gave you an assignment and said draw a house…on a piece of paper. The first thing you would do, the first thing anyone has ever done when I’ve asked them to do that, is they start with the box and the roof. The frame. Always the frame. No one starts with the window and the TV in the living room in the background. No one starts with the little chimney with the smoke coming out of it.
“That is [an] unhindered, creative act. An unconscious creative act and we naturally put limitations on ourselves.”
Or, put another way, “We can’t order everything on the menu when we really create something. We have to really design it out.”
But what about just letting your mind wonder? Everyone can point to those random Eureka! moments, either in their work or personal life, when greatness strikes without any effort.
Professor Schrift says he does occasionally get pushback from people who argue the best ideas come when they aren’t pressing for one.
“If for some people, jumping on the trampoline and listening to strange music works? Keep doing that,” he says with a laugh. “But having said that, we offer another tool. We can’t always take a passive approach and wait for us to get this ‘aha moment’ in the shower.”
 
This interview first aired on WHYY’S The Pulse.
 

Building ROI and data into your innovation process

Published date: December 7, 2015 в 3:00 am

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Delivery via drones, real-time data insight into your operations, transformation of your business models— what will 2016 bring for your innovation practice?
For innovators working within the confines of large enterprises, the possibilities for transformation, especially with mobile and digital products, are endless. Lean, digital disruptors threaten their larger, more rigid corporate counterparts. Many in the C-suite view these innovations as not only a way to maintain market share with consumers, but also usher in new eras of productivity, efficiency and customer engagement.
And yet, many of these investments will fail to meet those lofty goals, and not because the ideas themselves are rife with fundamental flaws. It’s the execution and refinement of the initial idea that dooms the project. Many innovators take on a project without a plan to measure and revise the return on investment projection (and course-correct) as the product evolves.
For example, a large enterprise wants to digitize its sales operations to shorten the length of the sales cycle, from initial contact to closed deal. Inexperienced sales reps often show or send the wrong collateral for the prospective customer’s needs, and lack the ability to quickly access the collateral and tools out in the field. Leadership wants to digitize the collateral into a web-based desktop app. Here’s the problem: the team missed the insight that a bulky laptop is just as bad as a stack of papers out in the field, along with their need to access documents offline. After the release, these conditions resulted in the app making no foreseeable dent in the length of the sales cycle because about 90 percent of the users abandoned the app.
When our group was brought in to rescue the project, our research revealed that the mobile sales force needs quick interactions and more guidance as to when different collateral should be shown to prospective customers. A mobile application that works offline and has a sophisticated tagging system, with tags for the type of customer and stage in the sales cycle, significantly reduced the length of the sales cycle for that team. As new features were added, the return on investment for those additions, such as allowing users to create personal “sets” of collateral, was calculated.
A Strategy Framework to Drive Innovation– and ROI– at Large Enterprises
It is possible to drive a creative and thoughtful process without losing sight of the return on investment. Really.
The key is to prioritize the end-users’ needs. About 70 percent of software projects fail because of user adoption. If an innovation fails to make an impact for an end-user, they will develop a workaround to not use it on their way to abandoning it completely. Every innovator will eventually hear user feedback– the difference is getting that feedback in the beginning significantly lowers the cost of changes. For each phase of a mobile app, researchers at NASA found a ten-fold increase in cost to make changes to the requirements.
Just ask Ford: When they debuted a new system to merge 30 disparate systems to serve their suppliers, it was a multi-year $400 million project that promised big payoffs for their relationships with their suppliers. The only problem was that once it was released to the suppliers, they were taken through as many as five screens to see only a portion of the data they needed, according to reports. This additional frustration and effort led users to abandon the system, later followed by the entire company.
As the design wireframes and prototypes bring the product to life, measuring and testing the efficiency and effectiveness of the user interactions, as well as interviewing users about their decision-making process when testing the product, make the return on investment projection and performance targets increasingly realistic.
For example, our team worked with a large utility company, who sought to improve the customer service experience of their call line. Unless the customer is calling to set up or turn off the service, customers are reaching out because of frustration, i.e. a service outage or a bill dispute. What made that experience worse was the multiple screens, random shut-downs, and different program jumps it took for the call center representative they were speaking with to solve their issue. A simple bill dispute took 53 clicks to resolve.
After understanding the common call issues and the call center operators’ needs, it was clear how to roll out a simplified user interface that increased time-on-task for operators. The result: increases of time-on-task by 79 percent and operator efficiency by 400 percent. A simple bill dispute was concentrated in one screen with 9 clicks. Training for new hires, which mainly focused on navigating the system, was cut in half.
This provides crucial proof of concept for IT and innovation managers as they push the company to invest more in transformative innovation.
As you look to 2016, make ethnographic research of your end-users your highest priority to see the ROI and real business impact of innovation– and your innovation budget in 2017 will thank you. Check out our free guide to innovation strategy for a comprehensive overview of our field-tested strategy framework.
 
Bio: Rachel Nitschke is the Content Marketing Specialist at ChaiOne. After graduating with a degree in journalism, she worked in nonprofit communications before landing at ChaiOne to focus on demand generation and content marketing.

Good Business Is the Best Art

Published date: December 1, 2015 в 3:00 am

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“Being good in business is the most fascinating kind of art. Making money is art and working is art and good business is the best art.”

                           —Andy Warhol

Recognizing that business is an art form and that you, as a businessperson, are an artist is critical to surviving and thriving in the sharing economy. Leading brands must see themselves as artists of business first and agents of commerce second.
Art today is the ultimate vehicle for transforming a common commodity into a sought-after treasure. Why? Because art transforms something that was once utilitarian into a vessel of engagement, like Warhol did for the Campbell’s soup can.
Being an artist of business involves taking a product and turning it into an experience that engages the consumer and makes them a fan and loyalist for life because they are drawn to the product and to the emotions the product evokes. Try thinking about your products and services from an artistic point of view. What feelings do you want to evoke in your consumers? What feelings do you not want to illicit? Understand the creative and emotional impact of everything you do when it comes to your brand and learn how to create experiences, messages, stories, systems, services, and products that express the essence of that artistic vision.
How PepsiCo Turned a Bag of Chips into a Work of Art
PepsiCo demonstrated Warhol-inspired artistry with their Do Us a Flavor campaign, which invited customers to submit their ideas for a new potato chip flavor. The campaign is a great example of business art that turned their product, a bag of potato chips, into a canvas for global creative self-expression. This disruptively creative platform put potato chips front and center on the global stage by engaging the world in a co-creative process to artistically imagine a new generation of snack food, custom created by the public and Pepsi.
As the contest was global, an amazing array of exotic and unusual flavor combinations—from chicken and waffle to onion Lakshmi to Fluffernutter to pumpkin blood—were submitted to a panel of judges, who chose finalists from each country and ultimately a winner. The winner received $1 million and got their picture on their bag of chips.
The Do Us a Flavor campaign generated over 3.8 million submissions, and sales of the original chips, as well as sales of finalist chips, went through the roof. The campaign provided a ready and ever-renewing source of engaging content for the company’s website and YouTube channels.
The Do Us a Flavor campaign illustrates that today, people don’t just want to consume a product; they want to engage in the artistic endeavors brands can provide. And perhaps more important, this campaign demonstrates that creative experiences are what will influence purchasing decisions going forward, just as much as the quality of the product itself.
Interact and Connect
Warhol lived and worked in constant connection with others. The Factory was designed to be an environment that had all manner of people constantly connecting in new and unusual ways. This was the inspiration for Warhol’s art, and one of the reasons that he became more than a painter and grew into a movement that still has relevance today. In many ways, Warhol and his business model presaged the era of connectivity that we live in today through technology. So modern-day artists of business can learn a lot from Warhol’s approach to sharing.
The number one priority for brands today should be to create for the we and not for the me. While that is counterintuitive to traditional business strategy, as consumption is an individual activity, brands that embrace we-ness and build community are the ones that will ultimately win at the increasingly competitive global game of instigating consumer participation.
Why WeWork Works So Well
WeWork is a contemporary embodiment of the principles that drove Warhol’s Factory. WeWork bills itself as a community of creators, and has created work spaces nationwide designed to house the entrepreneurs, small business owners and artists of tomorrow, wherever they might live and work. WeWork is a business studio environment that appeals to innovators, mavericks, and artists who have left the constraints of corporate America behind and set off in pursuit of their own business missions with an eye toward building a better future.
Beyond office space, WeWork offers collaborative environments where innovators of all varieties can connect and share, resulting in countless mini incubators of business artistry. WeWork offers a panoply of services designed to instill and instigate creativity within its community. Amenities range from physical offerings like shared office space; conference rooms, and networking opportunities to creativity festivals such as sleep-away camp retreats imagined to facilitate collaborative imagination and innovation.
 
Adapted from We-Commerce: How to Create, Collaborate, and Succeed in the Sharing Economy by Billee Howard. © 2015 by Billee Howard. Tarcher Perigee, an imprint of Penguin Random House LLC.
 
Billee Howard is the author of WE-COMMERCE: How to Create, Collaborate, and Succeed in the Sharing Economy (Perigee Books, Penguin Random House). Howard is based in New York and is founder and chief engagement officer of Brandthropologie, and president of Mojo Risin Studios. She has been guiding companies to produce, envision, innovate, and create passionate dialogues and has had the privilege of working with many great leaders and brands including Jeffrey Katzenberg, Dreamworks Animation, Faith Popcorn, PepsiCo, Samsung, FastCompany, Boeing, Warby Parker among others. Howard was the winner of PR Week’s 30 under 30, and 40 under 40, as well as being selected for the Media Professional of the Year Award twice.
 

Yes, There is Such a Thing as an Ugly Baby

Published date: November 23, 2015 в 12:48 pm

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Imagine you’re working on a new initiative, and you come up with a great idea. You do some research on it, and you find some really good evidence to support your point-of-view. You think to yourself, “The team is going to love this.” So you go to your boss to pitch the idea.
But the boss seems skeptical. So she asks you to go out and do a some more research on it. You’re convinced this is a winner, so you go out and get a lot more data to support your case.
Along the way, you run across a few things that suggest that maybe it’s not such a great idea. But you ignore it because there is so much data in favor of your idea. You rationalize the negative information to minimize it – perhaps the source is not credible, or their situation was different. You just don’t much much value in it.
You go back to your boss and present all the positive evidence. You either leave out or barely mention the negative data that goes against your argument. And in doing so, you have just committed a cognitive error that can lead to poor judgments – The Confirmation Bias.
Confirmation bias is the tendency for people to only seek out information that conforms to their pre-existing viewpoints, and subsequently ignore information that goes against them. You overweight the good news, and underweight the bad news.
In some cases, you look for information to justify the decision you are already planning to make. This happens a lot in job interviews. Imagine you’re interviewing a candidate for a job. You think the candidate is a good fit, so you ask questions that allow the candidate to present himself in a positive light. If you know you won’t hire the candidate, you tend to ask questions that force the candidate to focus on his or her deficiencies. That is confirmation bias, and most of the time, you’re not even aware that you are doing it.
You would think that the availability of mountains of information could protect you from the confirmation bias. The problem is there is so much information that we have to make choices. We have a strong tendency to select according to what we believe.
It’s not hard to see why confirmation bias can lead to bad decisions. If we don’t gather a fair balance of information, we don’t give ourselves a complete and objective view of the situation. You increase the chances of being wrong.
By the way, when you share all the evidence with your, positive and negative, it actually strengthens, not weakens your case.
Confirmation bias is something all humans have. But just being aware of it isn’t good enough to prevent you from it. You can’t get rid of it, but there are things you can do to mitigate its effects and make better judgments.
To avoid confirmation bias, keep these pointers in mind:

  • List out the reasons that support your case. Then, imagine each one of them is wrong. Ask, how would it affect your decision. Take your strongest arguments and go find evidence that disproves them.
  • Get help from colleagues in finding evidence. Ask one colleague to find only positive evidence. Ask another colleague to find only negative evidence. This will help give you balance.
  • Find someone to act as a “dissenting voice of reason.” Present all the evidence you have and let them challenge you. That way you’ll be confronted with a contrary viewpoint to examine.
  • Frame opportunities in a way that forces you to find ways of disproving your hypothesis. Instead of saying, “let’s find reasons why this initiative will work,” frame it this way: “Let’s find reasons why this initiative won’t work.”

 
 

Innovation’s New World Order

Published date: November 16, 2015 в 3:00 am

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The shifting map of global innovation In the 2015 Global Innovation 1000 study, Strategy&, PwC’s strategy consulting group, provides new insights into the ways corporate innovation spending—which totaled $680 billion last year—has been changing in recent years, and examines the implications both for the future course of global economies and for corporate performance. How and where innovation is performed matters: As Harvard Business School professor Michael Porter, author of classic texts on corporate strategy and the competitive advantage of nations, has noted, “Innovation is the central issue in economic prosperity.”
If you look at global innovation spending in terms of where companies are headquartered, it’s not obvious that much has changed over the years: It always looks like North America is number one, Europe is number two, and Asia is number three. But that conceals what has actually been happening. If you instead focus on where the world’s largest companies actually do the work of innovation, the story is very different.
We’ve done that analysis in this year’s study, comparing today’s data with the situation in 2007, when we first examined the globalization of corporate innovation spending. Just eight years ago, the top region for R&D activity was Europe, which accounted for 35 percent of the global total, followed by North America with 34 percent, and Asia, with 27 percent. Today, the order has reversed: Asia is now number one, with 35 percent, North America is still second, with 33 percent, and Europe is last with 28 percent. A complete reversal in just eight years.
Asia’s rise and Europe’s decline
The fact that innovation spending is rising in Asia is not a surprise, but our study details the magnitude and rapid pace of the growth: Total corporate R&D activity grew 120 percent in China, for example, between 2007 and 2015, and by 115 percent in India. Most of this spending is being conducted by companies from Europe and the U.S., and they are not primarily seeking lower labor costs. According to R&D executives, their chief motivations are to be closer to their customers and suppliers in these fast-growing economies, and to gain access to the right technical talent.
The relative weakness of R&D spending in Europe, however, is a surprise. Innovation spending in Europe grew by only 9 percent from 2007 to 2015, while the amount of R&D spending European companies did in other regions increased 46%. The decline of particular counties has been even sharper. In Germany, for example, inflows of R&D spending from other countries fell by 7 percent from 2007 to 2015, while R&D “exports” to other countries rose 76 percent. In France, inflows fell 21 percent, while exports rose 46 percent. Overall, the data suggest that Europe is seeing a relative “hollowing out” of its innovation capabilities.
The U.S., in contrast, has maintained its #1 relative position in corporate R&D activity, despite the fact that U.S. companies still exported quite a bit of R&D to Asia and Europe. One reason is that U.S. companies continued to increase their R&D spending in the U.S. at healthy levels; the other is that the U.S. benefitted from significant imports of R&D activity from other regions—including from European companies who have been attracted by the U.S.’s stable economy, its flexible and innovation-oriented business culture, and the depth of R&D talent available—especially in software and digital businesses.
Global innovators outperform
Our study also shows that globalizing innovation pays: Companies that overweight their R&D spending outside their headquarters country outperform their less globalized competitors. Our study found that companies that deployed 60 percent or more of their R&D spending abroad in 2015 earned a premium of 30 percent on operating margin and return on assets, and 20 percent on growth in operating income.
I’ve guided the Global innovation 1000 study since its inception 11 years ago, and our analyses of R&D spending by corporations have provided many important insights. We’ve demonstrated conclusively, for example, that the amount of money a company spends on R&D does not correlate with its success as an innovator, or with its financial success. Instead, we’ve shown that what matters is a company’s ability to translate its innovation spending into superior products and services via superior end customer insight and R&D portfolio management. This, in turn, flows from an innovation strategy that’s tightly aligned with the company’s business strategy, a well-tuned capabilities system, and a corporate culture that supports innovation. (All previous Global Innovation 1000 studies are available online.)
This year’s study suggests that that the globalization of R&D spending will continue to yield benefits. As companies further develop and optimize their global innovation networks, they will continue to tap into more diverse talent pools and gain deeper insights into growing markets. The net result will be more innovative and profitable companies, and further increases in global economic prosperity.
 
AUTHOR BIO: Barry Jaruzelski is a thought leader on innovation for Strategy&, PwC’s strategy consulting business. Based in Florham Park, N.J., he is a principal with PwC US. He works with high-tech and industrial clients on corporate and product strategy and the transformation of core innovation processes. He created the Global Innovation 1000 study in 2005, and in 2013 was named one of the “Top 25 Consultants” by Consulting magazine.

Your Loyal Customers Love Innovation. Give It to Them

Published date: November 9, 2015 в 3:00 am

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A great source of new sales growth is with your existing loyal customers. After all, they already understand the category, they trust your brand, and you have an existing relationship – meaning you’ve been given permission to interact with them. When I say loyal customer, I mean one that buys 100% of the product or service from you and no one else like your main competitors.
You have three ways to get growth from your loyal customers: increase quantity purchased, increase purchase frequency, or increase the price, assuming you have a valid reason to raise it. Let’s look at each one.
Increasing the quantity purchased means getting customers to buy more volume of product during each visit to the store, whether online or in person. There are a variety of ways to do this. One way is through product packaging. Costco, the membership warehouse club, sells everything in bulk quantities. When you buy paper towels, you don’t get one, or two, or even three. You have to buy one big package with twelve rolls of paper towels.
Another way to increase volume for each shopping visit is to cross promote your products. When the customer buys something, offer them something else that goes along with that product. Amazon does this the best. When you add an item to your shopping cart, Amazon displays this: Customers Who Bought This Item Also Bought, etc, etc. And they show you a variety of products to consider. Very smart.
Another source of new growth is to get customers to shop more frequently. The more times they visit you, the more they’re likely they are to buy something. A simple way to do that is to offer special promotions and discounts for repeat visits. I buy a lot of my clothes online from a company in London. It never fails. Right after I make a purchase, they email a really juicy offer to get me back in there. Works every time!
And the third source of growth with existing, loyal customers is price. Raising price just a small amount has a huge impact on profitability. But you have to give your customers a good reason for the price increase, and that means offering them a new source of value. It could be from a new, innovative product feature or some new service that you offer as part of the overall relationship. LinkedIn for example offers their subscribers a base level of service for free, but then gives you the opportunity to upgrade to various premium levels giving you access to more features. Smart.
So take a close look at your 100% loyal customers and find ways of using all three approaches to sales growth. Hey, they already appreciate doing business with you. Given them a chance to be even better customers and you’ll love the outcome.
 

An Innovative Mindset: The Foundation for Your Innovative Thinking

Published date: November 2, 2015 в 3:00 am

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By John Sweeney & Elena Imaretska
One of the most common excuses we hear from folks who are reluctant to embrace innovative thinking is that they “are not creative” or not “right-brain thinkers.” We like to gently remind them that the ability to think innovatively is in fact a learned skill, and can be improved with rigorous practice. In fact the old myth of right-brain versus left-brain predominance is incorrect. New technology is allowing researchers to begin to identify the brain processes and structures that are involved in creativity: While there are still many unknowns, evidence points to it as a combination of several cognitive processes instead of just one. Additionally, according to neuropsychologist Rex Jung and his team these processes don’t rely on a specific region of the brain but rather brain networks and hubs, which are engaged at different times and for different purposes. Cognitive processes, both analytical and creative, depend on the neural networks of the brain and use the whole brain, not just one part of it, as shown by a team of researchers from University of Utah.
The reason why innovative thinking could feel foreign or perhaps uncomfortable to some is because they are not used to using the neural networks that fuel it. The brain networks necessary for creativity are different from those needed for intelligence. As Jung pointed out in an interview, intelligence requires strong and direct neural connections between networks, which provide fast information processing. Creativity, on the other hand, requires looser neural connections, which allow the brain to meander, helping us link unexpected ideas and concepts.
The fact is, if most of the time you rely on your intelligence and ability to recall or file information quickly, break down problems, and solve them as quickly as possible based on prior experience, it’s no surprise that when you are in the innovation trenches, your biggest foe can be a mindset that focuses us on what is known and comfortable.
We’re all familiar with the learning pyramid model of tool sets, skillsets, and mindsets—with the last element being what everything else rests on top of. The proper mindset allows us to use the skills that we have developed and the tools that we are afforded in the specific ways we need them to accomplish tasks. This is especially true of innovative thinking – there are so many wonderful techniques and tools that can be so effective in guiding, shaking up, or transforming our thinking. Unfortunately, if we are not grounded in the right mindset, those tools and techniques may not work as quickly or as effectively.
We were recently catching up with a client of ours, who is an expert in design thinking and uses the methodology the Stanford d.school (Institute of Design) has developed on a daily basis to innovate around various problems. He was sharing his experience of facilitating a two-day innovation work session, which engaged a large group of key stakeholders around a hot-button issue. Although the process and tools the group was using were superb, the team wasted a whole day before they began to generate worthwhile work. They were not in a mindset conducive to innovative thinking – each stakeholder was holding on to their own agenda, and not truly listening to their teammates, not deferring judgment on possible solutions, and not able to reframe information from different points of view.
As you practice innovative thinking, it’s essential to first ground yourself in a mindset that fuels it. In the 50+ years our organization has been involved in innovation activities, and particularly in the past 15 years of working with businesses, we have found that an innovative mindset, or as we call it a mindset of discovery, awards powerful assumptions. When you are in the mindset of discovery you believe that:

  • Mistakes are a great source of inspiration and learning.
  • Change is fuel—not an obstacle.
  • Ideas and honest opinions have value that we should celebrate, not judge.
  • We all have the power to create change and impact those around us.
  • We don’t need all the information just to begin.

You might wonder, but how do I ground myself in a mindset of discovery?
As psychologist and researcher Carol Dweck brilliantly points out in her book, Mindset: The New Psychology of Success: “Mindsets are just beliefs. They are powerful beliefs, but they’re just something in your mind, and you can change your mind.” That’s true, you can change your mind, and you can challenge yourself to be intentional about where you focus your attention and what lens you use to process information.
However, it is not easy to simply rely on intention. Research on habits shows that strong habits (or activities we perform at least once a week), do not respond to people only deciding to act or think differently. Having a strong motivation and a goal in mind is important, however, you also need to create a detailed plan of how you will behave in various situations. With that in mind we recommend adhering to five, simple behaviors, which can help you ground yourself in the mindset of discovery.
Those simple yet mighty behaviors—which we call the Big Five—are:

  1. Listen: Be present, open, and aware.
  2. Defer Judgment: Pause and accept the potential of ideas, opinions, and circumstances.
  3. Declare: Be authentic and clear, speak your mind.
  4. Reframe: Use what you have to move forward.
  5. Jump in: Develop a bias toward action, avoid analysis paralysis.

If you want to shift your mindset in order to aid your innovative thinking, simply act in accordance with the Big Five, and you will be surprised how much faster and easier it will be for you to maximize the innovative thinking techniques and tools you are utilizing. By practicing, you are exercising your brain networks involved in innovative thinking and strengthening the neural connections that matter. Build a strong foundation for your innovative thinking and relish the results.

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