Embracing complexity: an open approach to innovation

Before I joined IBM I worked on a project with a healthcare company to launch a new approach to drug development. The client had spent quite some time working on the new approach and had already devised their launch plan.

My team’s role was to do the market research that would prove it could work. A little bit ‘cart before horse’ you might say, but the launch plan was at least thorough and well-considered.

The trouble was, our research found some serious risks in how the industry and the public might react that the client simply hadn’t spotted. And, whichever way we looked at the results, we couldn’t find a way to mitigate the risks in the existing plan.

The plan needed to change, but the client wasn’t budging. They had their plan and they were sticking to it. There was no room for compromise.

As you can probably imagine, the meeting in which we presented back our results was a pretty uncomfortable affair and it was clear that even if we’d wanted to, we wouldn’t be asked to support the next stage of the programme.

This turned out to be no bad thing.

We found out later that the launch plan had been put into action without any changes and that the ‘risks’ we’d foreseen had indeed come to pass. The whole programme was put on hold within five days of the launch, ‘pending review’. That was a couple of years ago and nothing’s been heard of it since.

Listening to customers seems like the most obvious thing in the world.

According to IBM’s Global C-suite study, for CEOs, customer influence is second only to the C-suite in terms of strategic influence. So why do we still hear about companies tumbling into the same predicament as my healthcare client?

They want to innovate their products and services, but whether it’s due to time restraints, resource pressure, or just an overwhelming belief in their own convictions, they continue alone. I’m certainly not arguing against the value of gut instinct, but when it comes to the practice of innovation I do believe – and experience has shown – gaining multiple perspectives on a problem or an idea is vital to finding the best answer.

That’s why I also believe in value of open innovation and the tremendous potential of social media.

Social platforms and behaviours have a major role in enabling innovation. IBM’s study into how successful organisations innovate identifies three areas where leaders outperform the competition: organisation, culture and process.

Open-innovation-social-1

Source: More than magic: How the most successful organizations innovate, IBM Institute for Business Value, 2015.

Culture and Process are both important to my earlier point about time and resource constraints: by developing a culture that appreciates innovation and the conditions it requires, and has the processes in place to support innovation-generating activities, then you will be better-placed to act swiftly and confidently when the need arises.

Organisation and structure is the ‘glue’ that unites Culture and Process, ensuring the activities within both ‘spheres’ deliver value back to the business. It’s here where I want to focus for a moment.

By building robust structures to support ‘open’ forms of innovation it becomes possible to tap into the wealth of market intelligence and insight shared by your customers in social media. More significantly, it also becomes possible to connect with those customers directly, to formulate new ideas and concepts, and develop and prototype products in an inclusive way.

Lego Ideas is probably one of the most well-known and successful examples of open, social innovation. The platform not only helps customers build affinity with the brand, but for Lego promotes higher success rates for new initiatives, thanks to the early input from customers.

Many other organisations have experienced similar benefits:

GE has adopted an ecosystem approach to accelerate its innovation programme, ‘crowdsourcing’ ideas through Quirky, it is able to reduce risk and costs while sharing revenue with Quirky and the inventor community.

Xiaomi, the Chinese smartphone producer, uses open innovation to improve product and as a vehicle for marketing and sales. Xiaomi releases a new version of its MIUI software every week in response to user feedback. The releases and feedback system are, in effect, the marketing content and channel, while the software itself provides a platform to generate sales.

Open-innovation-social-3

LEGO Ideas

Across all industries, firms face a common challenge in the growing complexity of the business environment. Unlike my healthcare client which tried to shield itself from the uncertainty this creates by focussing inward, I believe the best way to deal with complexity is to become more complex yourself – opening up the innovation process and providing employees with the tools and environments (physical or virtual) in which to engage in collaboration.

Of course, systems of governance must be in place to protect the firm and the collaborators, but in an environment where customers have the means and the will to share their views and ideas, surely it would be foolish not to listen?

Also published at IBM iX Blog: http://bit.ly/1CLrTSW

Thinking Lean? Think Social Business

Lean production at Toyota. Source: www.toyota-forklifts.ch

Lean production at Toyota. Source: http://www.toyota-forklifts.ch

For my money, Lean Thinking is one of, if not the most influential management philosophy of the last sixty years.

Ever since the 1950s, businesses large and small, from manufacturers to service providers, have been investing in the tools and techniques that have become known as “Lean” to boost profits and efficiency.

Toyota is the most famous exponent and the company where much of the practice began, but there are plenty of other examples of organisations that have benefitted across the public and private sectors.

To a greater or lesser extent, Lean has probably influenced every organisation active today.

Social Business, by comparison, is still in its infancy.

Many businesses still assume it means a Facebook or Twitter strategy and are dubious about how  “social” can be of benefit to them, beyond a channel for marketing promotion.

But I would argue that any team of managers applying Lean Thinking today needs to consider Social Business as an essential part of their strategy if they’re to get the maximum value from their investments and truly gain competitive advantage.

How are the two related?

Let’s look first at how they’re defined:

Lean: “The creation of more value for customers with fewer resources. The ultimate goal is to provide perfect value to the customer through a perfect value creation process that has zero waste.” (taken from http://www.lean.org)

Social Business: “The culture and systems that encourage networks of people to create business value.” (IBM)

Culture, people and value: there’s some clear correlation.

As Social Business is often mistakenly defined by social media platforms, so Lean is also often misunderstood as a set of tools and processes.

In fact it’s a philosophy designed to focus organisations on how they can deliver more value to customers by meeting demand instantaneously with ‘perfect’ quality and zero waste.

To do this means creating a culture of continuous improvement involving everyone at every level – as well as partners and suppliers too.

Foundational to Lean is a focus on the customer and an understanding of their needs so that customer demand can “pull” products and services through the production process.

Based on this definition it’s clear that one ingredient is essential for successful Lean transformation – good communication.

Managers need to be active and involved in the change process and visible and accessible to the wider workforce, which in turn must be well connected to ensure that the organisation can respond swiftly and smoothly to customer demand.

It’s here that Social Business transformation has a vital role to play.

By encouraging the culture and establishing the processes and technologies to enable more networked and flexible communication and collaboration, organisations can equip themselves with the means to successfully practice Lean.

In effect, organisations can apply Social Business methodologies to empower their workforces – another essential aspect of Lean.

It’s only by empowering people to take decisions and make changes that the proactive, incremental improvements can be achieved which Lean identifies to create better organisations.

In practice this means giving people the means to make their voices heard: to express ideas, make recommendations, share their achievements and gain feedback and recognition.

Again, the application of Social Business practices makes this possible.

A great example is the recent work by IBM (my employer) with Tesco, where by putting in place an internal collaboration platform and new working practices, colleagues across the organisation can communicate in a much more fluid way and be freer to focus on the customer than on navigating the structures of the organisation to get their ideas heard:

The business landscape has changed tremendously since Lean first came on the scene, but today I believe it’s more valuable than ever.

Business has become more networked, sophisticated and complex, driven to a large extent by technology.

This creates more potential for waste – whether in people’s time or materials – and that’s bad for the organisation and for its customers.

I’ve argued before that every business is a Social Business because the act of business itself is inherently social; an “Unsocial” business would have a hard time recruiting employees and forming partnerships with suppliers and distributors …let alone attracting any customers!

The difference is that now we have the technology, processes and expertise to enrich that innate sociability, encourage it and enable it to deliver benefits to the organisation and the people it serves.

So adopting Social Business shouldn’t necessarily be considered as the radical change it’s often portrayed.

Rather, it’s a natural extension of the practices they’re already applying today.

Redistributed future: the IBM and Twitter partnership

IBM-twitter

“The future is already here. It’s just not evenly distributed yet”

I get reminded of this quote from William Gibson all the time.

Almost everyday I’ll spot a situation where applying a technology that’s already available could make a difference, but the practicalities of cost, expertise or the logistics of making it happen mean the problem and the solution aren’t able to connect yet.

In business, the partnership announcement by IBM and Twitter yesterday brought those two things closer together.

Twitter is an invaluable source of insight for businesses of all shapes and sizes into market trends; what their customers think of them today – and are likely to think tomorrow – and a valuable early warning system to spot potential issues on the horizon.

Most businesses I encounter have some form of Twitter listening system in place; it helps them tailor their products to better suit customers, deliver greater value and be more successful as a result.

But they also use lots of sources of data to aid decision-making and a major challenge is integrating them – from market research material held in a structured database, to the unstructured conversation content that can be harvested from Twitter and other social platforms.

Twitter’s relationship with IBM means the two can be integrated, which is good news for businesses and I believe good news for customers too.

For business, it means better insight which can lead to new business models; attract and retain customers; transform processes and improve risk management.

And for consumers it means value, because if the businesses isn’t firmly focused on understanding its customers and the market environment to deliver value, then it will have a rocky ride indeed – no matter how good its data and analytics platforms might be.

Earlier this year Twitter acquired Gnip and now it’s partnering with IBM. I predict there’ll be more partnerships and alliances like this to come across the technology sector.

And bit by bit, the future gets redistributed.

Update (1 November 2014): I’ve just discovered that Google and PwC has announced a partnership, offering clients a combination of Google technologies and PwC consulting services. It will be exciting to see how these relationships play out in practice.