Friday, December 5, 2008

Want to increase capacity of your innovation factory? Check your C-E-O

Innovation factory: Conventional wisdom says that “Innovation” and “factory” don’t go together. Factory is meant to be for producing pre-specified goods and picture of a factory with new ideas getting converted into cash appears more like a surrealistic painting. But conventional wisdom also says that don’t trust conventional wisdom all the time. Especially when an innovation guru and CEO of Proctor and Gamble A. G. Lafley (called AG) says, “We started from the premise that it is possible to run an innovation program much the same way we run a factory” in his book Game-changer co-authored with Ram Charan. Can we create a simple and yet useful model of the innovation factory? A model that can tell us where we should build more capacity? Let’s give it a shot.

3 stages of innovation factory: Let’s assume we are looking at for-profit organization. This model has 3 stages: (1) Opportunity identification (2) systematic Experimentation and (3) Commercialization. Combining the initials of our three underlined keywords O, E and C leads us to our tagline: C-E-O in the reverse order. Ideally the title should have said: Do the opposite of CEO. Let’s look at each of stages briefly.

Stage-1: Opportunity identification: This stage is the eyes and ears of your factory. This stage has 3 distinct characteristics. 1. Its output is insights and not ideas (see Innovation trigger: idea vs insight). As AG mentions, insights come from deep understanding of your customer’s and non-customer’s anxieties and aspirations. Sometimes these needs are articulated; many times they are unstated 2. Throughput of this stage may not increase by investing in market research. P&G having one of the finest market research departments wasn’t creating enough insights. 3. Throughput of this stage may not increase just by conducting more brainstorming sessions. This is especially true if the group is homogeneous like people from only one department like engineering or marketing or research. An insight may look something like this: Lower-income Mexican women like to use softner; they have high standards for performance; and doing the laundry is arduous, time consuming and requires plenty of water for multiple cleaning and rinsing steps (from Game-changer).

Stage-2: Systematic Experimentation: If opportunity identification stage is your eyes and ears, this stage is your hands and tools. Output of this stage is learnings which results from answers of 2 types of questions: 1. What works under what context and why? 2. What does not work under what context and why? For example, the red balls correspond to “failures” and green balls correspond to “successes” in experiments, both contributing significantly towards the throughput of the factory. For every green ball, there is an associated prototype which gives glimpse of benefit the idea offers. Every quarter or half-year you should ask, “How many prototypes did we create? What are the learnings from the failed experiments?” You can read more about this in Stefan Thomke’s Managing product and service development.

Stage-3: Commercialization: This stage is similar to your traditional production, marketing selling stages with following exceptions. If it is a completely new product, you may have to develop new production factory (e.g. Nano), find new channels, create new sales force etc. More often than not your output will be new features, processes or brand proposition which may need tweaking of one or two existing processes.

Map this to your innovation factory and you should be able to find out your weakest link. Are you ready to check your CEO?

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