Blocking breakthrough innovation

The announcement of Steve Ballmer’s retirement as CEO of Microsoft has been accompanied by the recital of a sad list of major innovations created by that company, but rejected by the management during his term of office and exploited successfully by competitors – notably by Apple.

The list includes the iPhone and the iPad. And they are probably just the tip of the iceberg. What’s more, the company did launch a stream of new products that failed.

Poor Ballmer [?] is by no means alone. He’s just more famous than the other CEOs who routinely block breakthrough ideas.

The central problem in innovation isn’t coming up with ideas, nor with implementing them. It’s with recognising and supporting them. After all, the more disruptive the idea, the less likely it is that consumer research will pick it out as a winner, and the more likely it is that it will contravene an existing mindset.   

Distressingly there’s no evidence that senior managers are any better at picking breakthrough winners than my mum.

So farewell, Steve Ballmer

I had looked forward to seeing Steve Ballmer, the CEO of Microsoft (who has recently announced that he is stepping down). He was guest speaker at a major Coca-Cola conference in the mid-90s that I was co-facilitating with Bill Boggs. At the time Microsoft was the hottest company on the planet.

In the event… I just thought he was preachy, screechy and dull.

I’m not really surprised that the company has performed so poorly over the past two decades. So poorly that Microsoft’s stock surged when he said he was off.  

Jugaad Innovation – game-changer?

Most exciting and challenging new innovation book so far this year is Jugaad Innovation*. I was introduced to it by a young researcher at the Big Innovation Centre, Prateek Sureka. I facilitated a strategic workshop for the BIC team at Hertford College in Oxford last week.

Jugaad is a Hindi word that means something like “clever, frugal innovation”. It’s the reverse of the process-driven, rule-bound, dollar-driven innovation approach that has been steadily adopted by Western companies in recent years – an approach that has done more to strangle good new ideas at birth than to liberate the creative forces of growth.

I particularly enjoyed the authors’ description of the way that Six Sigma had gradually strangled innovation at 3M, and how the new CEO eventually set them free again by the suppression of Six Sigma and the re-introduction of 3M’s venerable, powerful (and empowering) 15% rule.

Jugaad is an approach embraced in resource-poor communities – especially in India, of course. It has six main principles:

Seek opportunity in adversity
Do more with less
Think and act flexibly
Keep it simple
Include the margin
Follow your heart

What an opportunity it presents to a range of Western mega-corporations who seek to spend their way to innovation success – not least Microsoft, who are reported as having invested $9 billion a year on R&D, but with rather paltry outcomes.

*Jugaad Innovation: think frugal, be flexible, generate breakthrough growth by Navi Radjou, Jaideep Prabhu and Simone Ahuja, Foreword by Kevin Roberts. Jossey-Bass, 2012

Bought your Nespresso machine yet?

I’m often asked how large, established corporations can organise to create breakthrough innovations which really succeed in the marketplace. To be honest, there isn’t one easy solution. So many of them invest vast sums of money in innovation and R&D, and all that happens in reality is that they give birth to a steady stream of more minor, incremental offerings.

If Microsoft can spend some nine billion dollars a year on it (see “Microsoft and their search for breakthrough innovation”, 2 March 2011) and have such limited success, what hope is there for the rest of us?

Well, one strategy that worked extremely well for Nestlé was embodied in the way that they went about developing their Nespresso brand. The company realised quite early that, given their worldwide dominance of the instant coffee market, if they were to enter the ground coffee market with a bang, they needed to have a completely new approach that would rewrite the rules of the game.

To do this, they set up a stand-alone business, geographically and organisationally separate from the “corporate machine”, Nestlé headquarters in Vevey, Switzerland.

And the concept itself is radically different. It is a superpremium product for a much more sophisticated consumer. The relationship with Nespresso starts with the purchase of a coffeemaker/espresso machine. Those things are bought once every eight or so years - and the purchase involves 100+ euros.

Then, having a consumer who has bought a machine, it is about home-delivery of coffee – and a one-on-one communication program including accessories, services and rewards. This required a totally different mindset, different marketing capabilities and completely different structural solutions.

Certainly wouldn’t be without it myself. And it’s a massive success around the world.

Would that have been possible if they had remained part of the mother-ship? I doubt it.

Microsoft and their search for breakthrough innovation

There’s been much discussion over recent years as to why Microsoft has had such a low to non-existent strike rate in developing breakthrough innovations.

Certainly it’s not for want of trying, nor for want of resource. In fact, it’s twenty years since Bill Gates first decided to pour megabucks into R&D. Currently that budget is running at $9 billion a year. But two decades on, aside from a stream of incremental innovations, there’s little to show for all that investment.

Currently the company has high hopes for its Kinect system. But was that really what Gates had in mind when he started on this great creative Odyssey – a games controller?

The fact that Apple has been so successful in creating and introducing one blockbuster after another, has led inexorably to their overtaking Microsoft in market value last year.

Lack of breakthroughs – disruptive innovations – is certainly not confined to Microsoft. My experience is that many large, established corporations have the same problem. And they usually know it and take steps aimed at remedying the situation.

Nearly always they assume that they understand what needs to be fixed – and get on with fixing it. Without noticeable effect.

In reality, there are many possible blockages and barriers, some of them behavioural, often attitudinal, occasionally at organisational, strategic, skills and process levels. And it’s critically important that the right issues are diagnosed and the right treatment prescribed.

“Stunningly arrogant,” as Microsoft has been described, may or may not be the source of their problem. They need to know which it is before spending more time and effort trying to fix it.

In major companies that I know well, the wrong diagnosis, coupled with the wrong treatment, has led to the problem being redoubled.