How Focusing On The Big Picture Can Help Grow Your Bottom Line

May 23, 2011

This article was published on the American Express OPEN Forum.  When I sent in the article, I called it “If you focus on the hot dog, you might go hungry.”  Clearly they didn’t like that title :)

Regardless of how you feel about Trump’s now aborted run for President, you have to give him credit for creating a cult following to some rather engaging television since early 2004. Trump’s show has a business slant to it and at times provides useful insightful tips for businesses of any size. I am reminded of an episode of the Celebrity Apprentice that applied some particularly valuable innovation concepts.

The task for the week was to see which teams, split up by men and women, could sell the most hot dogs to raise money for charity. This particular episode opens with Trump informing the celebrities that they’re all “commodities” and should leverage their “personal brand” to help them.

The first challenge was to establish the price of the hot dogs: low enough to sell large volumes yet high enough to maximize margins. This is a challenge that all companies face when pricing their products or services.

Each team started selling their dogs for about $5. As they progressed, they began up selling their customers using a variety of creative gimmicks. Their plan appeared successful so they continually increased the selling price by bundling in extras (e.g., pictures with the celebs).

Each took a slightly different approach. Omarosa, the lead for the women, didn’t think her team should use their celebrity status in the task and should instead focus on skill. They primarily focused on “traditional” business techniques, selling as many high priced hot dogs as possible. In the end, they sold about $17K.

The men’s team, headed up by Stephen Baldwin, begins using their celebrity status right out of the gate. Gene Simmons, one member of the team, calls a collection of his elite group of friends asking them to visit their stand. Instead of selling $200 hot dogs, they sold $5,000 hot dogs to their high-roller friends. The result? Over $52K in sales. Over three times the profit of the other team.

This winning team figured out something quickly. The hot dogs were not the end game—they were a means of getting to the objective: raise the most money for charity. They effectively took Trump’s advice to creatively leverage their “brand” as well as their connections.

This highlights one of the mistakes that organizations make when thinking about innovation…

Read the rest of this article on the American Express OPEN Forum

How To Motivate Innovators

December 7, 2010

Organizations use a variety of tools to motivate employees to participate in their innovation efforts.

Innovation and points systemsThe most common form of motivation involves compensation via a points system.  When you contribute an idea, solution, comment or vote, you get points – much like American Express Membership Rewards points – that can be used to buy a variety of items: company T-shirts, mugs, and other “exciting” things.  For some reason this reminds me of the arcade games like skeeball where you would win tickets that could be exchanged for wonderful items like fake vampire fangs or rubber spiders.

Some companies have taken the concept a bit further and allowed people to accumulate points that can be used in auctions.  Once a month the company holds an auction for a trip to, say, Tahiti.  Anyone with points can join the bidding.  This encourages people to earn and save as many points as possible so that they can have a chance at some really big prizes.  This supposedly stimulates contributions to innovation.

A third model that doesn’t necessarily need a points system involves “priceless” awards.  Remember the Mastercard commercials?  These are items that you can’t buy with money: dinner with the CEO, a prime parking space or an extra week of vacation.  These types of prizes are particularly enticing because no amount of money can buy them

The thing that these three models have in common is that the prize is tangible.  Some might call it an extrinsic form of motivation.  Chip Conley, author of Peak, might point out that these are the lowest rung of motivations on Maslow’s hierarchy of needs: food and shelter/safety and security.

There is an opportunity for other, potentially more effective forms of motivation.

At the highest level of Maslow’s hierarchy (going back to Conley’s concept), you will find self-actualization.  In the innovation/business world, this is where “the work is its own reward.” The open source software movement was largely built on this model.  Millions of people have helped develop software without any formal extrinsic compensation. Many do it just because it feels good to contribute.  For some, it is about building software that will bring down the “evil empire” (aka Microsoft).

Although this is an incredibly effective motivator for many, this is difficult to put into practice inside of a “typical” organization.  Ok, when I worked for a Formula 1 team, people there truly love their work because they were fans of the sport.  But this is usually the exception, not the rule.  At least from my experience.

Between food & shelter and self-actualization lies the most under-utilized form of motivation: peer recognition.  This can be extremely effective, especially inside of organizations where “intelligence” is highly valued.  Pharmaceutical companies, R&D departments, and NASA come to mind off the top of my head.

For some individuals, being recognized by their peers is the highest form of motivation.  In come circles, being published in a peer reviewed journal is an incredible honor.

Therefore find ways of recognizing people, especially when it involves peer recognition.

One way to do this if you use a points system like the ones described above, is to create a leader board.  This creates a friendly competition and helps individuals stand out from the crowd based on their contributions.

Another approach, of course, is to develop a good recognition program as part of your communication plans.  Many companies do this, but they rarely do it well.  Here’s the real opportunity…

Stop recognizing people for doing their job. When you hire someone to work for you, it should be expected that they are competent.  When you recognize people for doing what they are hired to do, it reinforces a “culture” where the status quo is good enough.

Instead, recognize (and reward) people for going beyond their job; for doing things that are unexpected.

If you want to encourage open innovation or cross-business unit collaboration, then recognize people for that.  If you want employees to take risks, make a big deal out of individuals who do that.  If you want to let people know that failure is ok – when done the right way – then promote situations where something didn’t work as planned yet powerful lessons were learned and risk was mitigated risk.

Define what your organization values and then reward on that.

Culture is sometimes defined as “a network of conversations.” What they say to each other and what they think to themselves.  Shift the conversations and you begin to shift the culture.  These types of programs are a great opportunity to create an environment of innovation and promote the values/conversations you want to instill.

Measures: Will You Get What You Want?

May 10, 2010

I recently spoke with a new client who shared with me their innovation measures.  When I looked at their measurement system, I immediately saw flaws.

But before addressing these imperfections, let me first provide you my perspective on innovation measures.

In general, there are three types of measures associated with “challenge-based” innovation (be sure to read this article if you are unfamiliar with the concept of challenge-based innovation):

  1. Process Measures - These measure the activity associated with your challenges (e.g., 500 registered solvers, 40 submissions per challenge, 80 votes per challenge, etc)
  2. Solve-Rate Measures - These subjectively measure how well you solved your challenges (e.g., 82% of challenges were partially solved, 61% of challenges were completely solved, etc)
  3. Value Measures – These measure the actual value accrued (e.g., increased revenues by $25M, reduced costs by $35M, etc)

The last measure (value) is where the rubber meets the road.  This is your ultimate goal.  But sometimes, value realization can take years (or in the case of pharmaceutical companies, decades).  Therefore, the second measure (solve-rate) is a good way to monitor progress with your program.  But what about process measures?

Process measures are leading indicators that can be useful in measuring trends over time for things like community engagement, effectiveness of internal communications, and quality of challenges.

Let’s look at one common process measure: the number of ideas/solutions submitted for a given challenge.  This was one of the measures that my new client used.

Imagine that you are using crowdsourcing to find a solution to a challenge.  You post the challenge on your website or intranet.  A month later you check to see how many responses you get.  In this scenario…

Which is better:

  • getting 100 ideas/solutions?
  • getting only 2 ideas/solutions?

Most people intuitively think that 100 solutions is better than 2.  In fact, most organizations believe that more ideas equates to greater success.  The reality is, however, that 100 is not necessarily better than 2.

Let me re-frame the question…

Which is better:

  • getting 100 ideas where only 2 of them were exactly what you needed and the other 98 were duds?
  • getting 2 ideas where both were exactly what you needed?

Now the correct answer is a bit more obvious.  In this situation, the latter is probably better.  The amount of work needed to sift through the solutions is a lot less when you have only 2 submissions.  Imagine if you received 10,000 ideas of which only 2 were good.  You can see now that the effort to find the best solutions/ideas might be overwhelming.

Although activity is good, too many submissions can indicate that you have a poorly defined challenge.  Therefore the ratio of good ideas to duds might be a more interesting measure.

The key is, make sure you understand the unintended consequences of your measurement system, especially when it comes to process measures. If done properly, process measures can help you drive higher solve rates (measure #2). And often, higher solve rates lead to greater value (measure #3) in the long run.  But not always.

High solve rates with low value can also indicate problems with your innovation program:

  • Poor implementation – You are unable to convert solutions into finished products/services
  • Poor commercialization – Your solutions do not meet the needs of the market/customers and therefore do not generate revenue
  • Poor relevance – Your challenges, although solved, are not important enough to “move the needle” of the organization’s innovation efforts

Measures are important for helping tracking your innovation efforts.  And they can help diagnose potential issues.  But it is important to measure the right things.

There is an old expression: “You will get what you measure.”

But the bigger question is, “Will you get what you want?”

Measure Innovation NOT InnovationS

March 24, 2009

Measuring innovation is very different than measuring innovationS (“s” capitalized for emphasis). Let me explain.

In our goal-obsessed society, we want to measure everything that moves. In doing so, we feel as though it gives us a grasp of the real world. But is this true? Do measures really provide a lens into reality?

A colleague of mine used to say, “You’ll get what you measure, but will you get what you want?”

This poses a very interesting question. What should you measure in order to get the insights you want and the behaviors you desire?

In the past I wrote a few blog entries on this topic.

In “How Do You Measure Success?”  I talk about how quantitative measures can be misleading indicators as many factors impact the numbers. Maybe qualitative measures provide more accurate insights. But how do you accurately capture this information?

In one of my favorite blog entries, “Innovation Lessons from the Apprentice,” I discuss how measuring hot dog sales, stopped one team from being creative. As a result, their competitor, who was not constrained by the numbers, made three times the profits of the numbers-driven team. Read this article. I suspect most companies are measuring hot dogs, not results.

When companies try to measure innovation, they are really measuring innovationS.

InnovationS have a start and end. You can measure the amount of effort put into developing these ideas and the value they produce. Some common measures are:

  • Number of ideas generated
  • Number of people who contribute ideas
  • Number of ideas selected and implemented
  • Economic value generated from implemented ideas
  • % of revenue from products introduced in the last year

The big question is: How do you know if your organization is innovative enough? How do you measure innovation (without the “s”)?

The answer: When your business achieves its overall performance targets. This is real innovation – innovation as a capability – and not just an innovation pipeline. This is embedded innovation that happens real time, and, as a result, is much more difficult to directly measure. The only real measures for this are business results.

At the end of the day, these are the only measures that really matter.

Are you measuring innovations or innovation? Or, in other words, are you measuring hot dogs or results?

P.S. Be sure to read my blog entry entitled “Is Your Organization Anorexic?” It explains why I chose the picture I did. In short, companies are obsessed with measures which causes them to get poor results. People too can become obsessed with numbers (e.g., weight) and miss out on what matter most (e.g., health).