Harvard Business Review

Dear Prof.Hamel,

Innovate or perish may be the apt slogan for this century and beyond. When I was a student (I still consider myself to be a
student) my Professors would constantly coax us into thinking
out of the box. Now that I am a teacher, I have slightly changed
the phrase to my students - think out of the window.

One of the largest financial services providers had 8000 customers during the first 90 years of its presence in India. The problem was that the organization concentrated on a niche market - High Net Income Individuals - of whom the numbers were not many in a developing country. When the firm wanted to expand, the Federal Bank placed a rider - for every urban branch, the organization had to open two branches in rural areas. The solution appears simple in hindsight but was a highpoint in innovation when it happened. The restriction was on traditional branches with people. The firm invested in technology and installed ATMs in convenient locations. Coming out of its niche market, the firm also allowed anyone with a relatively small amount to obtain a Debit Card. Today, the number of customers runs into millions, the experiment is to be replicated in other cities, and the minimum balance to be maintained in an account has probably allowed the firm to recover the investment on technology. For customers, the entire transition has meant freedom to carry out transactions on a 24x7 timeframe. This is a classic example that fits into all four dimensions outlined by you.

The move has also forced other players to install ATMs and since space is a constraint, today we have the unusual but very helpful concept of different players co-operating on the use of each other's ATMs.

In the same industry, one can also find the absence of innovation. A bank has installed ATMs at several locations. In many of these, one can only withdraw cash, one cannot deposit cash. Right next to one of its branches, the bank has three ATMs - not one of them can accept cash. It is difficult to believe that an organization that has thousands of highly-paid employees does not have sufficient common-sense to realize that some customers would also want to deposit cash.

From a different industry where service is taken for granted, one can cite an example of retrograde innovation. An airline, on more than one occasion in the recent past, has refused to allow physically challenged persons (paraplegics) to board the aircraft unless they signed a bond that would indemnify the airline if anything were to happen to the passenger during the flight. Why doesn't the airline realize that something can happen to anyone anytime - in air or on the ground. How does one get over this head-in-the-mud conservatism and din into the ears of the management of such organizations that we are in the 21st Century?

I firmly believe that innovation is an attitudinal dimension. And as any behavioral scientist would agree, attitudes are the most difficult to change.

Warm regards

Innovation can take place only when people think creatively. This holds true for an entrepreneur as it does for a company employee. Unfortunately, it has been my observation that people have either forgotten how to think, have begun to think less or in some cases, given up thinking altogether. One can blame this "unthinkable" disease of modern society on many factors: lack of encouragement to express oneself creatively at home or in class, pressures from bosses to conform at the place of work and finally, the plethora of mind numbing past times of everyday life: television, video games, increased drug and alcohol usage to solve problems, a life too fast to have time to make even the simplest of decisions and a growing generation of people too scared to make any decision for fear of failure.

With the size of such "losers" increasing in our society on an exponential basis, it is nothing short of a miracle that we still have innovative thinkers in our midst who have not forgotten the lost art of thinking.

That is why in my classes at the university, I always introduce critical thinking concepts before launching on to more complex business related topics.

In a business environment, it is not enough for top executives and managers to provide an environment to encourage their staff to think innovatively. They have to first ensure that their employees are capable of thinking. Those who lack such skills have to be retrained and tested before putting them back to work; those who fail to think creatively despite all efforts have to be let go. Of course, if a company aggressively recruits creative thinkers, then it will be able to innovate and grow much faster.

Can any company survive if its employees lack the critical art of innovative thinking? Think about it!

Raj Bose
Faculty - University of Phoenix

What i deduce is that innovation can be taught.
True products available in the market like Six Sigma do help companies to arrive at solutions to challenges or gaps experienced by business for improved performance.

What Gary's paper suggests is a new way for identifying the gaps in the four areas for improving business performance / bottom line

However an important fact is the methodology adopted to get innovative ideas from the above four areas to improve business performance.

Secondly how practically can we implement the ideas we deduce from the above to achieve the desired performance

The above always remain a challenge in organisations.

Dear Prof. Hamel.

I think the operating phrase is "anyone who is genuinely eager to “see differently.” ". I have been teaching various techniques, methods, methodologies as well as practicing these techniques in overcoming all the 4 U's that you mentioned over the years.

And I think it is clear, not all just start using it in their daily grind. They like every such workshop, seminar, and new techniques - but is it really a few who are as you said genuinely eager to see differently, who get up and start taking it forward. I dont really see any large company CEOs really fall in that category - really - as they have become large only by repeating what they have doing for decades - the scale-up process. So far the world was not changing as fast, as it does nowadays, - Now it is unavoidable for anyone to not to be geneuinely eager to see differently. May be the eyes need to be reinforced with diferent lenses. I have been experimenting so far and I think three clear winners are seen Lean Thinking from Toyota, TRIZ (Theory of Inventive Problem Solving) and finally Systems Thinking. I call it the LIST (Lean Inventive System Thinking) framework - in contrast to our long running Analogical thinking. You can get more info on LIST at http://www.aitriz.org/ai/index.php?page=2008/trizcon2008&article=pre_post_conference

I came to this article from James Todhunter's blog http://www.innovatingtowin.com/innovating_to_win/2008/01/pervasive-innov.html

Gary,

Our work suggests that leaders can transform organizational innovation by challenging the orthodoxy that employees must be controlled—the widespread assumption which has blinded the management profession to freedom’s opportunities inside organizations. Paul Staley and I challenged that orthodoxy by exploring “Is there any fundamental reason for management to control employees?” Our research found no basic reason to control employees, and instead revealed how leaders can build organizational cultures that encourage individuals to work freely, effectively, and creatively with full authority, full responsibility, and full accountability. Equally important, we discovered that we, Dave Packard, Sam Walton, Ken Iverson, Herb Kelleher, and Max De Pree actually used these fundamentals to build or transform company cultures within which individuals behaved more like creative entrepreneurs than traditional employees.

For example Paul articulated a vision of success for PQ Corporation— mission, aspirations, and shared values; emphasized self-responsibility, authority, and accountability; aligned long term employee and business interests; and harmonized individual needs with those of the business. The resulting culture transformed that staid, century-old inorganic chemical company into a laboratory of continual change and product innovation that out-performed the S&P 500 by a factor of five. As a side note, cultures like that also stimulate employee enthusiasm for new ideas such as your innovation theory.

Our book draft analyzes our experiences and those of Hewlett Packard, Wal-Mart, Nucor Steel, Southwest Airlines, and Herman Miller to provide everything needed to understand and utilize this superior alternative to management by hierarchical control:
• The fundamentals “Freedom-Based Management.”
• The management paradigm shift from “hierarchical control” to “vision-based freedom.”
• The powerful benefits that freedom and self-organized spontaneous order generate for owners, managers, employees, and society.
• A minimal risk strategy for introducing freedom step by step.
We will be happy to share this draft and look forward to discussing these ideas.

Regards, Bill Nobles
908-221-1485
billnobles@optonline.net

Greetings Professor:
Thanks for your post and your contribution to the field. As a practitioner of design innovation/business, I'm curious to know your opinions regarding competing innovation initiatives.

You're article emphasizes the need for training in innovation methods, which I applaud. The four areas you mentioned are necessary across organizations in fragmented markets selling commodity products.

In your experience, what happens when one innovation "concept", borne from an unarticulated user need, competes against a concept that's created from an underleveraged competency?

Do you follow a simple pro-forma of expected financial return, combined with an NPV analysis? What happens when that's not possible? After all, an unarticulated need is unarticulated for a reason, right? Do you spend time doing market research studies, while your competition goes to market with a cheaper, faster, prototyped alpha version? How do you get the different teams to work well with each other when each used a prescribed methodology to arrive at its innovation "concept"?

Thanks again for the tips. Oh, and major props for using reCAPTCHA for spam prevention.

Ash

Gary, you are an amazing gifted and entertaining while enriching writer! The business community is lucky to have you and American is unfortunate to have lost you... Keep up the great work and maybe I'll see on the Stanford links. If I get into a PhD program I applied for, you've inspired me to get my grandfather's golf bag out of the closet and hit up the driving range a 9 iron away from CarLab the center of innovation in the world's largest business that I hope will jump start the automotive industry's struggle to transform from an analogue based to digital industry.

I clicked on this post because I was expecting a different use of the word "hacker". In fact, I had forgotten it was used in the context of golf.

As an entrepreneur, I think of innovative hacking a bit differently. Where are there opportunities to flip the system? To get an auto-immune response from an industry? Clayton Christensen recently wrote about "Catalytic Innovation," in which a disruptive innovation catalyzes larger industry and social changes.

So, if you look at today's economic system with concern about its cost to environment, societies and communities, and view incumbent companies as wooly mammoths, built around a system that may be increasingly irrelevant, it is an invitation to entrepreneural "hackers".

At Envirofit, we have figured out how poor people can make more money while reducing air pollution. Instead of producing particulates and hydrocarbon emissions, they produce more income.

Paul Graham puts it well: "To add to the confusion, the noun "hack" also has two senses. It can be either a compliment or an insult. It's called a hack when you do something in an ugly way. But when you do something so clever that you somehow beat the system, that's also called a hack. The word is used more often in the former than the latter sense, probably because ugly solutions are more common than brilliant ones.

Believe it or not, the two senses of 'hack' are also connected. Ugly and imaginative solutions have something in common: they both break the rules. And there is a gradual continuum between rule breaking that's merely ugly (using duct tape to attach something to your bike) and rule breaking that is brilliantly imaginative (discarding Euclidean space)."

While I hope that large corporations increase both the pace of innovation, in terms of making their goods truly good, and their services truly serve, I am betting the change is going to be lead by the entrepreneurs. The big guys are going to be playing defense.

Continuous innovation requires that innovation is placed at the center of the organization and that all parts of the organization are changed to support it. To effectively place innovation at the center of the organization, people must know what innovation is, what it looks like in their organization, and how they can contribute. Most people easily confuse invention with innovation, and wrongly chase invention in the name of innovation. Let's look at the two side by side to clear up the confusion from a common source, the American Heritage Dictionary:

Invention - A discovery, a finding
Innovation - The act of introducing something new

In short, invention is coming up with a great idea, but innovation is the act of introducing that invention successfully to the world. Innovation is truly about transforming the useful seed of an invention into something valuable.

Check out this example of an invention that never became an innovation.

I always enjoy golfing analogies, only wish I played. Now I think that one way to teach innovation is to work with improvement of conceptualising - here I can think of one idea I had. Firstly place absolute constraints on the field of conceptualisation - provide the employees with the same cognitive task - but tell them that while working on this they can let their minds run riot with ideas and thoughts. So on a variation on the Rubrik's cube which was specifically designed for architects - use Lego or other plastic bricks. Say nine of them and the green field. If the employees have to come up with a new design or new concept - in short - innovation - let them (i) select the bricks (nine) from the box and then assemble them in whatever configuration they want - then (ii)tell them to think of the problem and rearrange the bricks into the configuration which they believe suggests a solution. By the time they have finished with the task - they will have conceptualised and come up with many
off centre ideas. All they have to do then (ii) is type them down.

The beauty of this innovation tool is that it is constrained, elegant in a conceptual way, and involves using several senses
that facilitate creative thinking.

Am I suppose to learn something from this overly lengthy piece that you went golfing? And then we have the sales pitch in the second to last paragraph.

As an improvement to the unneeded complexity, the four points should be placed in positive form:

1. Rethink beliefs and assumptions
2. Imagine and define new purposes for assets
3. Appreciate trends reasonably undistorted by the hype
4. Improve customer service

In response to "..know where game-changing ideas come from. In other words," how about you say it right the first time instead of the unpleasantly annoying "in other words." Thanks.

I don't think I shall be back to this particular blog, and its very poor and unreadable wording.

Hi All,

Just a thought on the use of the word "Hacker": An alternative and lesser known use of the word is found in the ancient art of falconry, where a newly fledged falcon is flown by "at hack" to learn the art of hunting and fending for itself. In this instance, the bird is fed by the "hacker" in an sort of incubatory period to ensure its survival while it upskills.

Much focus seems to be given to the development of the technique of identifying and creating innovations, and perhaps it is time to give space to nursery techniques for "hacking" innovations out into the wild world of mainstream corporate.