Create Value Innovation

Who are the positive deviants in this recession?

OK, there is plenty of negative chatter on the economy to go around.  Now what?  Time to start looking at the positive deviants.  These are the companies and individuals who thrive despite the circumstances.

If you look around, they are there.  Cirque du Soleil, a Blue Ocean Strategy original example, continues to grow its core business, while investing heavily in R&D and in scouting talent.  And critical to their success is finding financial partners who believe in their method and in their brand so that Cirque can continue to innovate and thrive.  Despite the economy, Cirque is launching new shows in new locations and is licensing their methods to new partners!

Hyundai defied the odds and conventional wisdom, first by winning a number of awards for its products.  Then it was the first major auto manufacturer to offer to buy back its cars if the buyer lost his or her job.  In hindsight, it looks obvious.  Just figure out who the non-customers are and what stands in the way of their buying a new car:  risk.  Find the obstacle and knock it away.

Netflix made it easy for consumers to rent movies for a low, fixed monthly fee and no late return penalties.  For itself, the subscription model provides a predictable revenue stream.  In addition to DVD's, Netflix made it easy for consumers to instantly view select videos on demand.  No cable needed.  No satellite needed.  In February, it delivered its 2 billionth DVD, while delivering much higher customer satisfaction than peers in the retail industry. 

As I work with business owners and managers and as I observe other successes these days, it seems there are some consistent patterns:

• Keep a feeder tube connected to ready pools of capital
• Invest in the future
• Identify and eliminate barriers to customer delight
• Get the eyes out into the field to uncover additional opportunities
• Look forward and focus on the positive.

These are just a few examples.  And these are just a few of the things that these positive deviants are doing to create their success.

What are the success stories you see?  What makes it possible for these positive deviants to succeed in spite of the economy, in spite of viruses and in spite of negativity?

Facebook Generation vs. the Fortune 500

Innovation is often focused on products and services.  What about innovating how you attract, engage and manage people?

Southwest made this part of its strategy.  By making employees number one (not customers), they were able to create a customer experience that has helped reshape an industry.  HCL, which has been referred to an "intellectual clean room where its employees could imagine endless possibilities" has made leader transparency a key element in attracting and energizing top talent. 

Who are your next employees?  Gen X, Gen Y, the Facebook Generation?  These are folks who are growing up online.  They start with Webkinz and eventually graduate to text messaging, Twitter, Facebook and other ways of engaging with self-formed groups.  Will your current management approach be relevant to this next generation of workers?

Strategist Gary Hamel created a list of 12 work-relevant characteristics of online life and I have reposted them below.  I encourage you to read Gary's blog post here to read the explanation of each.

1. All ideas compete on equal footing

2. Contribution counts far more than credentials

3. Hierarchies are natural, not prescribed

4. Leaders serve rather than preside

5. Tasks are chosen, not assigned

6. Groups are self-defining and self-organizing

7.  Resources get attracted, not allocated

8.  Power comes from sharing information, not hoarding it

9.  Opinions compound and decisions are peer-reviewed

10.  Users can veto most policy decisions

11.  Intrinsic rewards matter most

12.  Hackers are heroes

There are tremendous opportunities to leverage this insight.  For example:

• Figure out where this way of thinking, relating, innovating can allow you to capture new non-customers.
• As your boomers retire, create a transition plan to turn the reins over to Facebook leaders while maintaining or even improving performance.
• Leverage the insight and speed that internet-raised employees provide your firm to develop, market and sell new products and services.
• Understand how culture is changing across your firm.  For example, one of my clients discovered how vastly different the HQ culture is compared to how the field operates.  This will be a key factor as we develop a new business model and customer strategy.

Folks who grow up online see online as a way of life, not as a tool that they access.  Is your company's strategy ready to delight this generation of customers, workers and influencers?  What opportunities do you see?

Engineers, are your salespeople embarrasing you?

Engineers get frustrated when salespeople cannot fully and accurately communicate the business benefits of their creations.  Even more frustrating is when salespeople use so much jargon to describe their company and their products and services that their message is meaningless.  Of course your firm is innovative, customer-focused, flexible, resilient, earth-loving and friendly to animals and small children.  Really?

Blue Ocean Strategy is about creating and delivering a leap in value for your customers while reducing costs for you.  Create leaps in value by raising and creating value that the industry has underemphasized - but that customers are delighted by.  Reduce costs by eliminating and reducing those things that customers don't need or care about.

So engineers, if your sales and marketing teams deliver presentations that resemble this one (click here) at Animoto, please have them contact me and my team for help, won't you? 

We promise we will change the conversation they have with your customers!

Check out my OTHER blog - named one of the Top 100 Leadership Blogs!

I am honored that my other blog, Innovate Rotary!, was named one of the Top 100 Leadership Blogs!  It's nice to be recognized on the same list as Seth Godin, Tom Peters and many other insightful thought leaders.

Innovate Rotary! focuses on creating thriving, growing nonprofit organizations, with a particular focus on Rotary International.  In the spirit of Blue Ocean Strategy, it is about helping people rethink their assumptions about community service by creating more impact for less effort.

So, check it out here!  And if you like what's happening here at Create Value Innovation, be sure to bookmark it as a favorite!

How to increase sales performance without training

Many sales leaders look to outside trainers to give their salespeople a jump start, an energy boost, a shot of motivation and sometimes, some new skills and tools to help them succeed.  As one of those trainers myself, I can tell you that training is not always the answer.

Before looking outside for training, why not make use of the wisdom already at work in your firm?  It is waiting to be discovered among your positive deviants.  Every firm has them.  They are the people who make their numbers no matter what, even in tough times.    They are the people the sales team goes to when they need a new idea, when they need that special PowerPoint deck that no one else has, or when they are stuck on strategy and want to talk about it with someone they trust.

These people already have the answer to many issues you are trying to solve.  The key is tapping into this rich resource of insight and know-how.  Here is how:

1. Choose an important problem or objective.   What result is worth working on right now?  It may be as simple as making your numbers, increasing customer share or creating referrals.  The key is to focus on something that matters and is urgent to your firm.
2. Identify the high performers.  Who are the people whose performance is exceptional, who perform well beyond what is expected in this important area?  The prevailing water cooler talk may be that times are tough.  Yet as you look around, you notice that there are some who simply defy the odds and succeed anyway.  Who are they?
3. Discover their wisdom.   My colleagues and I have found that in three days, we can tap the knowledge, perspective and processes of high performers and make it available to the rest of the organization in a way that they can use immediately.  One of the keys here is to capture the essence in everyday language - not in "corporate speak."  The vocabulary of many training programs is an obstacle because the learner has to learn the meaning intended by the trainer - and then relate it to their own experience.
4. Put the wisdom into action.  You want the non-expert motivated enough to absorb, adopt and take action on what was learned from the high performers.  Structure the information in a way that captures the essence of the experts' insight and know-how,  while shaping it for adoption by the non-expert.  Credibility comes from the energy, passion and realism of the content.
5. Reinforce follow-through.  Most training is wasted because it never makes it into the learner's day-to=day actions.  Create a way to positively incorporate the expert's approach into the non-expert's behavior, personalized for the learner's understanding and paced for the learner's schedule.

You will find that the non-experts begin putting the ideas to work immediately.  Part of the reason is that the ideas were created by the people they go to anyway when they need an expert - the high performers themselves.  Even the high performers benefit.  One of the surprises is that many high performers never take the time to understand why they are so exceptional.  When they learn exactly what makes them great, they have a platform to get even better - and they do!

In many organizations, the person your sales and marketing people seek for guidance is not you, the sales or marketing leader or the trainer.  You are no longer the decider or "chief discoverer."  Get comfortable with your new role as facilitator and change agent.

Greg Krauska is President and Founder of The Change Agent Group.

This post also appeared at Sales and Marketing Management's SoundOff weblog.

Keep the idea factory open

Innovation is sometimes seen as what happens when you have downtime.  Most mature organizations place their greatest energy and emphasis on control and competition, versus collaboration and innovation.  In that world, downtime is an accident, not an intentional act. 

Mature or not, big or small, organizations must keep their flow of new ideas coming.  Even in a downturn.  As you emerge from a recession, you want a clear, relevant and compelling reason customers should choose you (if you don't offer that already).

Tom Fishburne humorously illustrates this point in his latest cartoon, inspired by Seth Godin's new book, Tribes.

So, how about you - what is your latest remarkable idea?

Funding Innovation in tough times

Innovation can sometimes be difficult to fund, as innovation is often seen as something that happens when you have the luxury of downtime.  Smarter firms are more intentional about funding innovation as a consistent part of their strategy.  But what happens when the economy is down?  What is the business case for innovation now?

In a recent Knowledge@Wharton article, panelists discuss the possibilities and advantages of investing in innovation even when the economy and the business are weak.  Among the ideas for identifying worthwhile projects:

• Align innovation initiatives with company goals.  Follow the money trail.  Create projects that will contribute to the firm's vision of success.
• Look for opportunities in customer experience innovation, in addition to product and service innovation.
• Look at weak spots in your portfolio.  A slow economy reveals weaknesses that may not have been noticeable in stronger times.
• Focus on projects that can create cost reduction.
• Look at major trends, such as nanotechnology, energy and health care.  What are the irreversible trends that could affect your industry?

Just as even great products need to be sold effectively to customers, innovation ideas need to be sold internally.  Here were some of the suggestions mentioned for how to sell your ideas:

• Get executive sponsorship (some things don't change, do they?)
• Communicate effectively.  Get beyond technical jargon.  Sell from your audience's point of view.  People need to like you, in addition to your idea.
• Develop your political savvy.  You may hate to schmooze.  To be successful, You may have to get over it.

Notably, great companies continue invest in innovation, even when challenged.  In fact, studies of previous downturns have shown that companies that tuned their cost structure and then spent down their cash ended up far more successful in the long run than firms that chose to hoard their cash until business activity picked up again. 

If you are a leader, make sure you focus on supporting and appreciating your innovation talent. 

How are you making the business case for your innovation efforts?  What is working right now?

Blog Action Day - Blue Oceans of Non-customers

As the world focuses on the financial meltdown, those who HAVE investments that are under water may forget that there are many in the world who are not ABLE to even consider investments.   Those are the billions of people on the planet in poverty.

If you practice Blue Ocean Strategy, you know that one of the key principles is to create and capture new demand.  So as you think about where there might be opportunity amid the current chaos, how could your company benefit by creating opportunities to alleviate poverty while creating new sources of demand for your products and services?

If you were to make a measurable impact in reducing poverty in some part of the world, how would you have to rethink your assumptions about your business model, your markets and your customers to make that possible?

And today, be grateful for all that you have, even if your balance sheet is a little lighter than it was one year ago!

Looking for a inspiration?  Check out 88 Ways to DO something about poverty right now.  What can you do to make a difference right now?

The Mortgage Mess - A Lesson in Managing Assumptions

Although the so-called bailout bill has been passed by Congress and signed by President Bush, everyone is ready to point fingers at someone they can blame for the crisis.  If we can simply blame someone, we can feel better because we think we can know what to watch for next time.

I cannot say that I know the ultimate cause of this situation nor who was responsible for it.  (Although, you will find some good economic discussion of it here)  I do know with certainty, however, what made it possible:  faulty assumptions.  Nearly every player in the mess made assumptions about what they thought would happen and for the most part, ignored evidence that went counter to their assumptions.  After they were in too deep, they failed to review their assumptions, or perhaps were in too deep to do anything but simply take it.  They were left to hope that their best case assumptions could eventually save them. 

Here are some examples of the assumptions I am talking about:

• Lenders assumed that real estate values would continue to increase indefinitely.  Otherwise, why lend 100% of the equity of a home?  They also assumed that a homeowner would never walk away from a home.  After all, people want to pursue the time-honored American Dream of home ownership.  But when homeowners who bought homes for $225,000 and a mortgage of 200K or more saw their home values fall to $150,000, why wouldn't they exercise their put option and give the collateral back to the lender?
• Homeowners assumed that their incomes and home values would rise indefinitely.  Otherwise, why borrow 100% of your equity?  In some cases, it was a matter of keeping up with the Joneses.  When 5 people work in an office together and all have basically the same job, how is it possible that one of them can afford a house that is 3x the value of their peers?  An inheritance?  Astute investing in tech stocks?  Others were simply grateful for the opportunity to own their first home and did not know what assumptions to even question. 
• Investment bankers assumed that if you divided the mortgages into components, you could spread risk and create new value for investors by providing a new way to earn return and manage risk.  But what happens when the assumed default rates are far higher than expected - and you can't reconstruct the mortgage to find out who is responsible for what?  What happens when you sit down and figure out that you have essentially created effective leverage of better than 25:1?  (By contrast, most of us can buy stock on margin at a maximum of 2:1)
• Investors believed that the mortgage brokers were following standards, that collateral values meant something and that appraisers could discern value.  Of course, now we hear the stories about bankers who told the appraisers what the "right" number should be.
• Politicians assumed that pumping more mortgage money into sub-prime loans was more important than concerns about the financial condition of Fannie Mae and Freddie Mac.  When Ginnie Mae and Freddie Mac were found to have some accounting irregularities, Congress rightfully asked why these agencies should be given the power they have.  Their benefit to Americans?  Lower mortgage costs for those who otherwise could not afford a mortgage.  After Congressional hearings, the agencies immediately increased their market purchases of sub-prime loans.
• Speculators thought that we were on the brink of a totally new economic model.  People were flipping Florida condos with huge gains in months, rather than years.  Even though new units were being built, there was no way that retirees would stop moving to the coasts!  Then along come a series of hurricanes and the "half-back" phenomenon.
• "Conservative" borrowers assumed this was all good for them, too.  If you were working to pay down your mortgage, you didn't mind what was going on too much because your home value was exploding!  You thought you had made one of the best investment decisions ever.  Even if you weren't ready to sell, it was nice to see the balance sheet numbers get bigger!

So who is the "evil doer" in all of this?  Just about everyone displayed a combination of trust and self-interest, in varying degrees.  When your neighbor or competitor is making it big, it is easy to get caught up in the excitement and lose perspective, isn't it?  And yes, there were some unscrupulous and arrogant players, to be sure.  And to some extent, a system that is made up of players who are primarily compensated solely on commissions (for selling, financing, underwriting, appraising, etc.) and not on performance of the underlying loan, you are playing a risky game.

But when you step back, you see an entire system in which most of its players made assumptions that proved to be incorrect.  We reached a condition of irrational exuberance that had very painful consequences when the assumptios unraveled.

So how about you, for your business, what assumptions are you making?  Here is a simple process for checking and managing your assumptions:

• What assumptions are you making now about your business - what your employees, partners, customers, suppliers and competitors are doing and will do?
• Of those assumptions, which are the most critical?  Of, let's say, 30 key assumptions that you are betting your business on, which 5 matter most?
• How will you test and monitor those key assumptions?  What will tell you that you are being conservative and that the opportunity is far greater than you believed?  What will tell you that you are being overly optimistic, that you are assuming facts that are simply not true?
• What will be your early sensing mechanism?  What will you watch and listen for that will give you an indication that your assumptions may be wrong - and that it is time to rethink your assumptions?
• Who will be responsible?  Whose job will it be to monitor each of your key assumptions and recommend adjustments?

Next time you get your team together to plan an important project - or check the status of an existing initiative, be sure to check your assumptions.  Make this thinking part of your strategic planning, customer planning and campaign planning.

While politicians cannot always speak with candor, your success depends on the candor and discipline you bring to managing and rethinking your assumptions.

Please, stop the Benchmarking!

Winning attracts imitation.  So companies like Apple, Google, Nintendo, Toyota and others are studied in minute detail to capture a bit of their magic, their secret sauce.  But what happens when everyone blindly copies the winners? 

Study after study shows that companies who simply copy others either fail or, at best, achieve parity.  The companies that truly excel, the ones that are significantly and consistently more profitable, are those that create their own spaces - a la Blue Ocean Strategy. 

Other studies demonstrate that successful firms consistently manage and resolve paradox and contradiction.  Success comes not from blind imitation, but from systematically rethinking assumptions and choosing where the firm uniquely needs to be next. 

Toyota is a great example of a company that both chooses its own path, while deftly managing paradox.  It balances the "hard" of manufacturing with the "soft" of culture.

Authors Hirotaka Takeuchi, Emi Osono and Norihiko Shimizu studied Toyota Motor Corporation for six years from the inside out.  Part of their conclusions are featured in a must-read article in the June 2008 issue of Harvard Business Review.  From the introduction:

Stable and paranoid, systematic and experimental, formal and frank: The success of Toyota, a pathbreaking six-year study reveals, is due as much to its ability to embrace contradictions like these [discussed in the article] as to its manufacturing prowess.

What are some of the contradictions?  Here are a few, paraphrased:

• Move slow to create big leaps
• We are cheap, though we invest big in people and capability
• We main hierarchy, yet we welcome "friendly fights"
• We communicate efficiently, though we actively encourage social networks
• We are efficient, though at times we invite "extras" to the conversation

I am looking forward to the authors' upcoming book (Extreme Toyota:  Radical Contradictions that Drive Success at the World's Best Manufacturer) to learn more about how Toyota strikes its balance.  I am especially eager because of their concluding advice:

People often ask us, “Tell me one thing I should learn from Toyota.” That misses the point. Emulating Toyota isn’t about copying any one practice; it’s about creating a culture. That takes time. It requires resources. And it isn’t easy.

In other words, don't implement TPS because they do.  Don't guarantee lifetime employment because Toyota does.  Don't copy their play book.   Start with your people and customers.  Figure out where your organization needs to go next to be successful - and then relentlessly create the culture that will take it there!