6/4/2014

the other side of

innovation
SOLVING THE EXECUTION CHALLENGE

Vijay Govindarajan Summary By

Chris Trimble Peter Modigliani

Thomas Edison

Genius is 1% inspiration and 99% perspiration

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Innovation Model

idea
leader
team
+ plan
innovation
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Address Fundamental Incompatibilities

Ongoing Operations
Repeatable and Predictable

Innovation
Nonroutine and Uncertain

Innovation Leaders Must Think Differently

About Organizing and Planning 4

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Real Innovation Challenge

Beyond the idea Long journey from

imagination to
impact
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Performance Engine
Ongoing Operations • Powerful
• Capable
• Productive
• Efficient
• Growth Potential

Impossible to
innovate
on its own
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Innovation Leaders

Rebels Fighting the Bureaucracy

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Each Innovation Initiative Requires

A team with a custom A plan revised by a

organizational model rigorous learning
process
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The Innovation Team

Performance Engine Company

Partnership

Shared Staff Dedicated Team

Performance Engine Limitations

Skills of the
Individuals

Work Relationship
Between Them
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Principles for Dedicated Team

1. Identify skills needed
2. Hire the best people
3. Match the organizational model to the team

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7 Common Mistakes
1. Having a bias for insiders
2. Adopting existing formal roles & responsibilities
3. Reinforcing performance engine power centers
4. Assessing performance from established metrics
5. Failing to create a distinct culture
6. Using existing processes
7. Succumbing to the tyranny of conformance
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Trap 1: Having a Bias for Insiders

• Pride
• Familiarity
• Comfort
• Expedience
• Compensation norms
• A desire to give attractive
opportunities to your own employees
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Trap 1: Having a Bias for Insiders

• Skills Deficit Risk – Investors flock to start ups

• Organizational Memory Risk – Little Performance Engine
• Outsiders – Add New Perspectives, Challenge Org Memory 14

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Trap 2: Adopting Existing

Roles and Responsibilities

• Use new and unfamiliar titles

• Write new job descriptions
• Create a separate physical space for the Team
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Trap 3: Reinforcing Performance

Engine Power Centers
Avoid replicating power centers for new team

Achieve a power shift through:

• Team hierarchy
• Clear decision rights
• Leadership choices

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Trap 4: Assessing Performance

From Established Metrics
Performance Engine metrics are rarely
equally meaningful to Dedicated Team

Identify performance metrics that matter

most for your specific innovation initiative
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Trap 5: Failing to Create a Distinct Culture

Common assumptions and company stories

• Examine the company’s culture

• Consciously adopt some elements of the culture
• Avoid claiming a uniquely innovative culture
which may offend the Performance Engine
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Trap 6: Using Existing Processes

If identical processes truly worked, the
initiative would be part of Performance Engine

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Trap 7: Succumbing to the

Tyranny of Conformance
HR, Finance, and IT drive standardization

Insist on being an exception to these standards

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Take a Positive Approach

• Create a team distinct from the Performance Engine

• Treat the Performance Engine like a strategic partner
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You Will Face 3 Challenges

1. Competition for Scare Resources

2. Divided Attention of Shared Staff

3. Disharmony in the Partnership

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1. Competition for Scare Resources

• Allocate resources
through one plan
• Fund Shared Staff
resources
• Discuss contingency
plans in advance

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2. Divided Attentions of Shared Staff

• Internal transfer
payments
• Special targets
• Added bonuses

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3. Disharmony in the Partnership

• Clear responsibilities
• Common values
• Insider collaboration
• Co-locate members
• External collaboration

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Run a Disciplined Experiment

1. Formalize the experiment

2. Break down the hypothesis

3. Seek the truth

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Predictions Improve With Learning

Prediction

Wild Informed Reliable

Guesses Estimates Forecasts

Time
Learning
Executives Demanding Results Over Learning Drive Failure
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Formalizing an Experiment
Plan the experiment
(or revise the plan)

Compare predictions and Predict outcomes,

outcomes, assess document supporting
lessons learned logic and assumptions

Execute experiment,
record measurements,
document observations

Learning Must Be a Rigorous Scientific Method – Not Intuition

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10 Planning Principles for Innovation

Invest heavily in planning
I
II Create the plan and scorecard from scratch
III Discuss data and assumptions
IV Document a clear hypothesis of record
V Find ways to spend a little, learn a lot
VI Create a separate forum for discussing results
VII Frequently reassess the plan
VIII Analyze trends
IX Allow formal revisions to predictions
X Evaluate innovation leaders subjectively
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Conversational Models

Spreadsheets Cause and Effect

Subsequent outcome
C
Outcome Sales

B D
Action Trial Use Product
quality
A
Advertising
spending

Focus On Conversations, Not Spreadsheets with Complexity

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Hypothesis Creation Technique

1 Divide the 2 Sketch a 3 Choose 4 Identify
budget for sequence of specific, additional
innovation into outcomes and unambiguous, factors that
5 or fewer subsequent measurable each outcome
categories. outcomes. outcomes. depends on.

5 Look for 6 Show how 7

critical
overlaps in Keep it simple
non-spending
category cause- – One page
decisions can
and-effect diagrams.
impact
chains.
outcomes
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Resolve Critical Unknowns First

Most
Severe

critical
unknowns
consequences if we
What are the

are wrong?

Moderate

Least
Minor

critical
unknowns

Certain Educated Guess Wild Guess

How certain are we? 32

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Supervise an Innovation Initiative

• Get off to a good start

• Monitor interactions with Performance Engine
• Stay engaged in a rigorous learning process
• Shape the Endgame
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Choose the Right Supervising Executive

• Powerful
• Broadly Experienced
• Able to Serve Long-Term
Company Interests

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Oversee a Family of Related Initiatives

• Strategic objective
• Form – New product/service launches
• Core functions of Dedicated Teams required
• Length of time
• Scope of expense
• Areas of uncertainty
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10 Common Innovation Myths

1. Innovation is all about ideas

2. The great leader never fails
3. Leaders are only fighting the system
4. Everyone can be an innovator
5. Innovation happens organically
6. Can be inside an establish organization
7. Requires wholesale organizational change
8. Innovation can only happen in Skunk Works
9. Innovation is unmanageable chaos
10.Only start-ups can innovate 36

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10 Innovation Truths
1. Ideas are only the beginning
2. Nothing simple about execution
3. Primary leader virtue is humility
4. Ideation is everyone’s job
5. Initiatives require formal resource commitment
6. Innovation is incompatible with ongoing operations
7. Innovation requires only targeted change
8. Innovation must be engaged with ongoing operations
9. Innovation must be closely and carefully managed
10. Many of the world’s biggest problems can be solved only
by large, established corporations
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Shape a More Innovative Company

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