Why the Pyramids Are One of the Seven Wonders

March 13, 2012

Innovation at USAANormally we don’t do this.

We have not yet posted an entire tip to this blog.  Yet, at the request of one of my clients, the publisher has agreed to let us do it…just this one time.

USAA is one of the coolest and most interesting financial services companies out there.  Every year they appear on Business Week’s list of best customer service organizations.  And they are innovating the way they innovate.

This tip describes the way they leverage organization structure to drive innovation.  Enjoy and feel free to share the pdf.

****  Download the pdf here  ****

Why the Pyramids Are One of the Seven Wonders

The Innovation PyramidMost companies start their innovation efforts by creating a new corporate function charged with delivering innovation. These functions are composed of employees who are reassigned to and dedicated to this new organization within the company. In most cases, this is a complete waste of time and money. This model keeps innovation separate from the rest of the business, and there is no involvement by the people who make the important decisions. Additionally, the innovation efforts remain out of touch with the real needs of the business.

Recognizing this common dilemma, USAA, a 22,600-employee financial service firm, took a completely different approach.

At USAA, innovation starts at the leadership level. Leadership sets the tone for the rest of the organization and is a strong advocate for innovative thinking. Next, USAA created a “core team” composed of thirty-five individuals, all of whom dedicate 100 percent of their time to innovation. However, here is the twist: Only ten of those individuals report directly to the innovation leadership. The other twenty-five “matrixed” individuals spend their time solely on innovation-related activities, yet with a focus on the specific innovation needs of their line of business. This creates widespread buy-in.

What USAA realized was that thirty-five people could not change the culture of a 22,600-person organization. Therefore, beyond the core team, it created a network of two hundred “innovation advisers,” each of whom spends 10 percent of their time on innovation efforts, working closely with the core team.  In addition, there are ten “innovation champions.” These are leaders who serve as powerful advocates for innovation and help break through any challenges that might pop.

How can you use this same method to accelerate your innovation efforts?

First, make sure your leadership team is on board, as they will set the tone, demonstrate strong executive support, and help challenge the status quo.

Of course, your leadership cannot create a culture of innovation on their own, as they have far too many other responsibilities.  Therefore, most organizations tag someone as a full-time “innovation leader” whose role is to help shepherd the innovation process.  Innovation leaders are different from other leaders within the organization in that they do not have direct authority over those who make innovation a reality. Ultimately, everyone in the company plays an important role in driving innovation. The innovation leader is more of a mentor, coach, and negotiator than a boss or taskmaster. Their ability to influence and sell the value of innovation and its practices is paramount to their and the organization’s success.

Next, create your innovation “core team” (sometimes referred to as a center of excellence), a small cadre of people dedicated to driving innovation into every corner of your organization. In smaller companies made up of few geographies or lines of business, this can indeed be a small central group. But in larger, more widely distributed organizations, the matrixed strategy is preferred, as it addresses the complexities associated with geographic, product, and customer differences.

This core team has many responsibilities. Some of them involve the basics: generating awareness, building the necessary infrastructure, selecting tools, creating training materials and plans, and developing a process for managing the innovation pipeline. But their more valuable role is serving as the eyes and ears of your innovation efforts, providing insights into the specific needs of their departments, employees, customers, vendors, and other stakeholders. They serve as advocates and mentors for innovation, bringing innovation to the masses. They are typically responsible for the development and delivery of innovation/creativity training. They also run brainstorming sessions for various departments. And they play an important role in identifying and shepherding challenges that may exist inside the organization. In essence, they are the go-to people when innovation is needed.

But no core team alone can ever make innovation pervasive. The next step is to pull together your ambassador network. Although all of these individuals are deployed to the lines of business, they must be passionate about innovation. Quite often, these people may dedicate as much as six hours per week (15 percent of their time) to innovation activities. This helps spread the innovation message even deeper into the organization. Since these individuals play such a critical role, contribution to innovation should be one of their performance measures.

How large should your ambassador network be? According to studies conducted by scientist Robin Dunbar, individuals have the capacity to maintain stable relationships with around 150 people. If we use this capacity as a baseline for determining a maximum sphere of influence, having one person in your network for every 150 people you wish to impact (or 0.07 percent) would be appropriate, but 1 percent is a good rule of thumb. At USAA, between the core team and the innovation advisers, almost exactly 1 percent of the organization is represented.

At USAA this approach has worked incredibly well. In only one year, the company achieved 84 percent employee participation (yes, you read that correctly) and implemented approximately one hundred employee solutions. What were the bottom-line results? There was more than ten times ROI for USAA and almost thirty times ROI for USAA members. USAA is different from shareholder companies in that it has a higher goal and motivation for taking care of its members— present and former members of the military services and their families.

These are impressive results. Follow USAA’s lead by embedding innovation throughout the organization.

The Egyptian pyramids worked so well because the majority of the weight was closer to the ground, making these structures more stable. Equally, this pyramid approach to innovation will ground your innovation efforts and fulfill the needs of the business and your customers.

Excerpted from Best Practices Are Stupid by Stephen M. Shapiro by arrangement with Portfolio, a member of Penguin Group (USA), Inc., Copyright (c) Stephen M. Shapiro, 2011.

Don’t Present What Can Be Pre-Sent

May 24, 2011

Being a professional speaker on innovation, I attend a lot of conferences and meetings.  And I am always amazed at how poorly most meetings are run.

One things in particular disturbs me…

When meeting time is used to present things that could have been sent via email.

Don’t do it!

Meeting time should be viewed as a huge investment in the attendees.  If you present information, status reports, or anything other static information that could be distributed before the meeting via email, you are wasting everyone’s time.

Next time you are holding a meeting.  Look at the agenda.  Decide what information can be disseminated in advance.  Then use the meeting time for conversation, networking, experiential learning, action planning, and other activities that can not be accomplished easily through electronic means.

When done properly, meetings can provide great value with a limited investment of time.

Content is No Longer King….Long Live the King (Part 1)

October 4, 2009

We often hear that content is king.  But I wonder if this is still true.

Let’s take some very simple examples.

I am sure most of you know that the iPod was not a revolutionary invention.  It was merely a new spin on the already existing MP3 player.  The real innovation was the integration of the iPod with iTunes.  This changed the game.  Using this model, the distribution of content became as important as the creators (the musicians) and the publishers (the record labels).  Apple is now one of the most powerful and profitable players in the music industry.

I now own an Amazon Kindle.  I have to admit, I love it (I’ll blog about that another time).  But what strikes me is that we are seeing the same “content distributor as king” dynamics unfold again.  In the book business, the author’s royalty is a pretty small slice of the pie.  I should know because I just signed a two book deal with Penguin’s Portfolio imprint.

Here are some illustrative figures for a printed book (kept very simple using made up, yet not far fetched numbers) …

  • An author can expect about 10% +/- of the retail price of the book.  So if the book retails for $25, the author gets $2.50.
  • The retailer expects roughly a 50% discount and then they sell it for whatever they can get.  If they sell it for a 20% discount, they gross approximately 30% of the price of the book (about $7.50).  Their profit is quite a bit less due to overhead costs.
  • Finally the publisher gets the remaining 40% or so – about $10 a book.  By the time the publisher has covered all of their costs, books that sell poorly can lose them money because they need to pay the editorial staff, the various designers, the printers, and the shipping companies.

As you can see, the creator of the content (the author) gets a small slice.  The publisher of the content gets a small slice.  And the distributor gets a small slice.  The rest of the money is eaten up in various costs.

Enter in the digital age.

Book on Kindle sell for $9.99 as a rule (we’ll make it $10 to keep it simple).  Let’s look at an illustrative breakdown now.

  • The author gets 5% of the retail (eBooks typically get a lower royalty) – $0.50.  As you can see, an author can make 80% less with a Kindle book.
  • The publisher and Amazon split the rest in a way I am not privy to.
  • The publisher’s costs are lower because they don’t need to pay for shipping and printing.  They still incur the upfront design and editorial costs.
  • Amazon’s costs are close to zero.  They only need to pay a small amount to Sprint to provide mobile services.  No overhead (except maybe some computer servers).  No distribution.  No warehouses.

In this model, I want to be Amazon.  Everything sold is nearly pure profit.  The content creator (me) is definitely not the financial king in this model.  The publisher does fine.  But the distributor appears to be the one in charge.

This concept of distribution as king appears in all areas.  I was speaking with a seasoned consultant from the retailing industry.  He indicated that a few years ago, the power shifted from the manufacturers to the retailers.  Wal-Mart has the lion’s share of power in the industry and they now call the shots.

You could argue that Google has a similar position, although their financial model is a bit different (AdWords accounts for most of their profit).  But like other distributors, they don’t create content.  Instead they aggregate content from a variety of sources into one distribution system.

I just read on Friday that Comcast may be buying a 51% stake in NBC from GE.  This shows how the power is moving from the creators of the content (the writers) and the publishers of the content (NBC and their production staff) to the distributors of the content – Comcast.

Are you a content creator or you a content publisher?  Does someone else control distribution?  Or, are there new entrants who might control distribution?  Beware.  The current and future distributors/aggregators of your content could be one of the most serious threats to your business.

More to come…

How To Create a Culture of Innovation

July 6, 2009

I define innovation as an “organization’s ability to adapt and evolve repeatedly and rapidly to stay one step ahead of the competition.” A culture of innovation, when done right, gives you a competitive edge because it makes you more nimble with an increased ability to sense and respond to change.

A culture of innovation has less to do specifically with new products, new processes, or new ideas. There are of course discrete innovations such as the iPhone or a battery that is powered by viruses (MIT has developed this). These are valuable and necessary in order to create a culture of innovation.

But a culture of innovation is more than new ideas. It needs to be repeatable, predictable, and sustainable.  This only happens when you treat innovation like you treat all other capabilities in your business.  This means having, amongst other things, a defined process.

An organization’s innovation process must achieve three things.  It must:

  • focus on the “right” challenges
  • find appropriate solutions to those challenges, and
  • implement the best solutions.

These translate into three “portfolios” an organization must create:

  • A portfolio of challenges
  • A portfolio of solutions
  • A portfolio of projects

Let’s take each one at a time.

A Portfolio of Challenges

All companies have challenges. They can be technical challenges on how to create a particular chemical compound. They can be marketing challenges on how to best describe your product to increase market share. They can be HR challenges around improving employee engagement.

An organization’s ability to change (i.e., innovate) hinges on its ability to identify and solve challenges. Challenges are sometimes referred to as problems, issues, or opportunities. But at the end of the day, they are all just various forms of challenges. I will use these terms interchangeably here.

Where do you find these challenges? You can find them anywhere – from customers, employees, shareholders, consultants, vendors, competitors, and the list goes on.

Let’s face it, companies have no shortage of challenges.

And guess what, some of the most important challenges to solve are hidden due to organizational blind spots and assumption-making.

The “meta-challenge” for all organizations is to find which challenges, if solved and implemented, will create the greatest value. Given that organizations have limited resources and money, prioritization is critical.

My favorite quote (used many times in this blog) comes from Albert Einstein – “If I had an hour to save the world, I would spend 59 minutes defining the problem and one minute finding solutions.” Most companies spend 60 minutes of their time finding solutions to problems that just don’t matter.

Therefore, the first step in creating a culture of innovation is to surface, identify, and codify challenges. And then you must become masterful at valuing, prioritizing, and framing these challenges.

Think of your innovation portfolio much like you would handle a financial investment portfolio.  You want some safe bets (incremental innovation) and some riskier investments (radical innovation).  You also want a variety of innovations ranging from technical challenges to marketing challenges, and service challanges to performance improvement challenges.

Once you have the right challenges to solve, the next step is to find solutions.

A Portfolio of Solutions

[Read more]

B2B vs B2C Innovation

August 19, 2008

I just had a conversation with a consulting firm that specializes in B2C innovation. Now they are being asked to do some B2B innovation. They asked me, “What’s the difference between innovation in a B2B and a B2C environment?”

Although in many respects, the innovation efforts are similar, there are quite a few differences which are worth noting. Yes, B2B can invest in collaborative product development and other more sophisticated methods/technologies. However, in this entry, I want to focus on the “softer” and less quantifiable differences between them. These mainly have to do with what your customers really want. Business buyers have different motivations than consumers.

Businesses Want You to Improve Their Business
Quite often, businesses buy from you because they want you to improve their business. You can reduce their costs, improve their effectiveness, or increase their business in some way. This requires a different mindset when studying customer needs. Although focus groups and discussion boards may be helpful in designing a new toothbrush, they are not as practical in a B2B environment. Instead, you need to observe their business. Back when I was a leader in Accenture’s business process reengineering practice, I discovered something interesting.  The most valuable use of reengineering is not to improve your processes, but rather to improve your customer’s processes. Observe your customers. Map their processes. See how your products/service can improve their business. And don’t forget to reengineer the interface between your business and your customer’s business.  As Michael Hammer (the father of Business Reengineering) used to say, “Make yourself ETDBW – Easy To Do Business With.” (the graphic above shows the three levels of process improvement)

Businesses Want You to Help Them Provide Better Product/Service to Their Customers
[Read more]

The Biggest Winner!

August 7, 2008

A few years back, I helped the Quill Corporation (a division of Staples) launch their innovation efforts. To introduce innovation to the employees, we kicked things off with a competition – “The Quillionaire” – based on the reality TV show, “The Apprentice.” You can read about the work we did then in an article published in the European Business Forum (pdf).

Since then, Quill has done a great job of keeping innovation alive.

“Across the organization, associates have contributed to Quill’s growth by providing innovative ideas and solutions for challenges and opportunities,” said Larry Morse, President of Quill Corporation. “We launched a program a few years ago to facilitate our ability to become a company of ideas. It is this wellspring of ideas coming from all over the company that is helping fuel our growth and will assist us in remaining competitive into the future,” he added. [Read more]