Issue 40, Sunday 20 May, 2001
Made in New Zealand - twice winners of the America's Cup
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You can't cost-cut your way to the future;
ultimately, the route to the future depends on innovation.
www.fastcompany.com/ftalk/sanfran/amongus.html


Award is a free fortnightly email magazine featuring the tools, techniques and best-practices that deliver high performance in the new economy
In this issue
WarmUp – One Big Idea
Ten Minute MasterClass® – Innovate or die

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WarmUp – BIG ideas

Recent issues of Edge First, Award's companion eZine, have focused on One Big Idea: One topic, explored in enough detail to do it justice. This issue, we're doing the same thing here. The topic? Innovation.
Why? Well … some of you old-stagers will know that it's been a past preoccupation of your editor. Especially the notion that performance excellence and best practice/benchmarking may be the enemy of innovation. And so has the idea that innovation is just another business process.
You don't fall to the top of a tree. You don't innovate by mistake.
Ten Minute MasterClass® – Innovate or die

For the past few years, the assumption has been that "the new" would win, discussion-group moderator Polly LaBarre said in a recent issue of Fast Company.
The disruptive, the young, and the fast would kill the old, the established, and the traditional.
Land grab analogies prevailed. The quick and the dead. First mover advantage. Highly innovative period – lots of wealth apparently created, now gone. Sure it was a bubble, inflated by some pretty silly talk. The bubble has gone. The internet remains, as important and transforming as it ever was, but what about innovation? Is it dead too?
Here's your first challenge, LaBarre said. Think of one innovation - product, organizational model, way of working - that's alive and well in the world of innovation. It could be something you're working on or something you consume, experience, purchase, or play with. When you encounter it, you say, "Wow! That's great stuff."
Here's what FC's panel had to say (as usual, severely abbreviated):

Peter Moore - interactive entertainment. I'm always amazed by the incredible things that young people generate from relatively little life experience. Guys in their twenties, tattooed and pierced, hair in various colors, devise games that blow me away.
Chip Conley - the hospitality business. I'm most impressed with Ian Schrager's Hudson Hotel in New York. 1,000 tiny rooms, like on a ship. Style for the masses in an industry that has been an innovation dinosaur.
Mike McCue - the combination of the telephone and the Internet, and what happens to that combination … a trillion-dollar industry, everything about it is changing. There's innovation everywhere.
Rusty Reuff - things that suddenly appear in pop culture … the Razor scooter. Somebody got really smart and said, "Let's make a skateboard with a handle on it." It makes me wish that I were 12 years old again.
Linda Yates - startups are still alive. Every day, new business plans. Despite the media, the market, VCs sitting on their wallets. There are still entrepreneurs. Stop worrying about the NASDAQ and the Dow.
Arno Penzias - token old-economy techie, jazzed by fluidic self-assembly. Silicon chips the size of grains of sand, mixed and poured over a piece of plastic, so that the little chips to fall into the holes. We'll be making stuff like that (a two-way radio for about a penny) in a couple of years.
Beth Sawi: I see innovation in what's happening with AIDS in poor countries … the women in South Africa who are breaking the pharmaceuticals rules to fight AIDS are going to prove everybody wrong.
Tim Brown - the "Rip, Mix, Burn" iMac ad … you buy an iMac, stick in your CD, which launches a Web site with song tracks. You pick your songs, burn your CD, and off you go. It's great.
Simon Jeffery - George Lucas completely reinvented the way movies are made. He had to. The special-effects, the digital-editing, and the sound-editing industries have all been completed altered by his thinking.
Ron Beegle - In the retail-clothing business, it's fashion items and basic items. Companies are putting those things together and are figuring out how they can make something big even bigger.

What role does innovation play in companies today? Fiscal discipline and innovation is not an oxymoron. Tension can spark creativity. In a world that is fixated on cost cutting and layoffs, what billing does innovation get?

Beegle - When online retailing first started, big companies thought that to compete, they had to play the online game. And they thought that their online business had to be separate from the parent. At Gap we didn't think that way. Today, we've got a business for the long haul, prepared to operate by the oldest rule: Make money.
Tim Brown - at Ideo, innovation is our lifeblood; as fundamental as accounting. We need to know how much money we've made; we also need new ideas. More important, we have to be able to implement those new ideas elegantly and beautifully. One of the challenges for a lot of companies is to create a culture that sustains innovation.
Beth Sawi - people say, "We want ideas." Then add, "But we don't want any bad ideas." Be prepared to accept failure; expect things to blow up. People only learn by making mistakes, let those mistakes happen … don't punish people for them. There has to be a tolerance for things that don't go well, things that fall apart, things that aren't perfect every time.
Rusty Reuff - culture and safety. During the past couple of years I've learned that innovation requires tension … our most productive days happen when we feel like our backs are against the wall. We're in a cycle where we feel that tension, and if we combine tension with encouragement to take risks, big ideas will emerge.
Linda Yates - people were looking for a big idea. Now they're trying to understand how to build a continuous capacity for innovation. The ecosystem for innovation is changing fundamentally … people are banding together - internally, across borders, across cultures - to support innovation.

Innovation rarely occurs in an ivory tower, the FC talkers said. To innovate properly, you've got to get out among your customers and find out what they really want.

Webber … in tougher times, we may have to be more innovative about where we find innovation. Are there any new rules of thumb or new places to look?
Moore To innovate properly, you've got to live and breathe innovation. At SEGA, we set up game-development teams all around the world. You've heard of Sonic the Hedgehog? Sonic team members are all Japanese, but they live in San Francisco - because their creativity flows more from American culture than it does from Japanese culture.
Sawi At Charles Schwab, we're learning that we can and must innovate, even in tough times.
We're doing a couple of different things right now. We have visions and values that we talk about. It's very easy to explain what you believe in when times are good. It's harder to explain what you believe in when you suddenly have to make tough choices.
Charles Schwab has employees on two tracks: Those who are going to stick around and those who are going to be asked to leave. We want both groups to feel as good as they can about the experience. That's where innovation comes in. Chuck Schwab is a great innovator. He said that the company should set up a scholarship fund for people who are being laid off, so if they want to, they can continue their education. He also suggested offering $7,500 hire-back bonuses.
Those kinds of initiatives show a company's commitment to its employees. And they show that the company is innovative, even though it's going through tough times.

What opportunities for innovation do you see? Are there patterns that indicate where people are looking for opportunities? Brown Innovation is about new and unexpected connections between things. We've spent the past few years developing a whole bunch of new channels, like mobile technology and the Web, and connecting them seamlessly. People seem to be looking for those kinds of opportunities to connect.
Penzias New technologies don't create innovations, but two technologies coming together with a market do. Sam Walton took the cash register, connected it to a database, and changed the face of retailing. Any place in the world where there's a gap, there's an opportunity.
Reuff We won't publish org charts because they constrain and confine how people think. Yates That's especially useful in an organization like yours, because you want to foster a hierarchy of imagination as opposed to a hierarchy of experience. By doing away with the org charts, you get people to stop thinking, "He's above me, and, therefore, he must be smarter."
People are now looking at their business models as much as their ideas - they're considering innovation from a process standpoint. They're moving beyond a product idea and asking important questions: Is there a business? Is there a new industry to create? How can I scale this faster? How can I get strategic alliances, strategic partners, strategic investors earlier to help me leverage what they may already have?
Startups have always been a basin of great ideas, but big companies have great resources. They have brand. They have distribution. They have functional talent. They have global reach. They have discipline, and they have people who really can get them where they want to be.
People have stopped saying, "I have a hip, hot, new idea" and have started saying, "I have a hip, hot, new idea, and I actually see a way to scale it." And that makes an idea a business, not just a product.

Want some concrete strategies for innovation? Here are 10 pieces of actionable advice for creating a more innovative organization.

1 Beegle Hire dreamers. Hire planners who can take the dream and put together a plan. Hire executors who can make that plan a reality. And let all of those people interact and work very closely together.
2 Jeffery Surround yourself with excellence. Don't accept the first people who walk in the door. Get the very best people for every role.
3 Brown The most valuable people have been through the idea-to-execution cycle a few times. Whatever you do, don't lose those people.
4 Sawi Focus on making your customers' lives better. Because if they can't see that your innovation is going to make their hotel experiences better or their game experiences better or their shoes better, you might as well stop now.
5 Penzias each morning is ask, "Why do I strongly believe what I believe?" Constantly examine your own assumptions.
6 Yates Create a tangible new-venture process. Ideas need a home. They need a place to go. They need people to review them. Change the metrics. Give people tools.
7 Reuff Recognition. People want to be recognized. One of the most creative people in our company says all the time, "When I deal with my developers, they have two questions: What's in it for me? What do I get out of it?"
8 McCue Do what you love to do, and surround yourself with people who are equally passionate and who are great people, great talent.
9 Conley The best ideas sometimes come from your newest employees. Usually, employees in a service business gets a top-down review after 30 days. Instead, Joie de Vivre has a "Fresh Eyes" review. Employees not only review us in terms of our competency, but they ask us questions like, "Why haven't you done it this way?"
10 Moore My parents grew up during the blitz, and when I was growing up, they enthralled me with stories of Winston Churchill - how he got them through hard times, as they sat in rooms with blackout curtains drawn, listening to a crackling radio, with bombers overhead. I've followed a lot of Churchillianisms in my life. I have a plaque with a Churchillian quote by my computer. It says something like, "Pessimists see the difficulty in every opportunity, but optimists always see the opportunity in every difficulty." My advice is, You have to see situations like optimists do. Innovation isn't a difficulty; it's an opportunity.
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We'd like, as always, to remind you about EDGE FIRST, our companion eZine dedicated to leaders and leadership - a fortnightly serving of provocative thinking about what it means to be a leader, and the tools, techniques and best-practices that drive leadership improvement. If you haven't seen it, click here for a complimentary issue.

In recent issues
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Quick case study/Jennifer White - on picking winning teams
tompeters! - new economy DNA. Flaky? Irresistable! The survival kit
Snapshots of the new economy - from Seybold to Subramanian
eStrategy - best, first, fastest, lastest ... just watch out for Wal-Mart
A better way - but don't try this at home
Gen II - who wants to be a CEO
>> Next issue June 3rd, 2001
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