Practice of Innovation

Find a Partner, Stick to the Fundamentals, and Start 

I gave a webinar to The Learning Consortium in May about how SRI International went from failing to being one of the world’s most productive R&D and innovation enterprises, having created Siri, HDTV, and many other world-changing innovations.  The presentation is here.  Throughout the presentation the hundreds of participants were asked questions. The answers are in the slides.  After the presentation the audience asked me additional questions about SRI’s transformation, which are given below with my answers.  For background, here is Steve Denning’s Forbes article about culture change at SRI while I was CEO.  The first rule was to never mention “culture change.” 

• What defines an enterprise’s innovation process?
  • The enterprise has:
    • Innovation as a central pillar of its strategic intent: a focus on the customer and on continuously creating new customer value.
    • Metrics for what “important market and customer needs” means to the enterprise.
    • A “Value Creation Playbook” that it uses across the enterprise, which includes NABC value propositions.
    • Mechanisms across the enterprise for learning and creating fast, such as recurring “value creation forums.”
  • There is more, but those elements are fundamental.  If they are missing, there is no innovation process.  You will never get to 100%, but even modest success on these fronts produces enormously productive results.

• How do you proceed with changing culture if there are at least three management levels above you?
  • You don’t need to ask permission. Get started, as indicated in my book with William Wilmot, Innovation: The Five Disciplines for Creating What Customers Want.  We first developed the ideas three levels down in the organization.  My managers at the time were great people but they were not heavily involved in our approach.  Since our practices only involved our local teams we didn’t need anything from the top.
  • We ultimately used these ideas to become the largest part of the company and, at that point, the board made me CEO.

• Do you have any thoughts on how your ideas apply (or get adapted) to the federal government sector’s unique business model and operational challenges?
  • The same principles and practices apply because they are fundamental value-creation principles. That is the point: focus on important customer needs; have a simple playbook that everyone understands; and create ways for people to learn fast.
  • Agencies around the world are using them (U.S., Finland, Singapore, Japan, Chile, and Taiwan) but, as you would expect, it is often harder in government.

• How much did changing out managers play into changing the culture do you think?
  • Over time a great deal. If management is against working this way, they can slow down or stop progress.
  • The managers who did not want to work this way left. In almost every case (I made mistakes!) we found terrific people who wanted to work this way.

• Was your book the outcome of your experiences at SRI, or was the innovation at SRI the outcome of your thought process while writing the book?
  • The core ideas initially came mostly from Norman Winarsky and our team working to understand and define best practices.  When we started it was embarrassing how little we knew.  We had to learn the hard way that much of what is taught about value creation is either wrong or doesn’t work.
  • Critically, I believe that every major endeavor needs a great partner, both for the ideas and the emotional support.  Norman was that essential partner.  Without him we never would have figured out what to do.  Norman became VP of SRI ventures and helped lead the formation of Siri, among other great achievements.
  • In addition to Norman, my partners later on included Bill Wilmot, Alice Resnick, Herman Gyr, Len Polizzotto, and the others I mentioned in my talk.  They were essential for helping refine the ideas and in putting them in a form applicable across SRI.

• You mention that culture change does not tell people what they have to do – however is that not the point. If there was a formula for this, then all companies would be able to do it.
  • Yes – there is no fixed formula.
  • But in my talk I described a “recipe” that is effective because it is based on fundamental, proven principles. But just like with every cook, the results will be different because it depends on the ingredients available and how the cook mixes them up.

• I would be interested to know what you learned together with your staff in the process, rather than what you already knew when you started and/or were able to tell your staff (which is valuable but as you said is probably best termed as best practice).
  • We continuously learned new concepts and methods from staff and partners about what worked and what didn’t.  If anything, the big learning was to keep the methodology rock-solid simple and stick to the fundamentals. It is a handful of ideas that make the biggest difference – exemplifying the 80-20 rule.   Professionals can’t remember and certainly will not use complicated approaches.  
  • My major critique of most alternative value-creation processes is that they are much too complicated. They will not transform an enterprise because they cannot be applied broadly.  Over and over we have seen approaches that are confusing.  You can prove that by asking a manager to describe their innovation process.  If the answer you get is unclear, then it is unlikely to be effective.  At SRI, Apple, or IDEO there is little confusion.
  • My favorite first question when I talk to people in a company is to ask them to define “value proposition.” If they can’t define that most basic concept, I know they don’t have a serious value creation methodology.
  • Much of what we learned over time involved the “human” aspects. Different professional disciplines and cultural backgrounds all respond somewhat differently.  Bio-tech, energy, and IT all have unique issues and concepts to be understood.  And what works in America is sometimes different from what works in Japan.  The fundamentals remain the same but the words, concepts, and implementation must be adapted.  For example, in Japanese there is no word for “champion.”  The closest word is “hero” and that is not at all what we were after.  You must adjust.

• How do you handle innovation, i.e. doing important and interesting stuff, while facing urgent matters in the organization, such as analysts’ expectations to meet financial goals?
  • First, there is no choice but to create new customer value if you want to survive. As Steve Denning always reminds us, Jack Welch famously said that, “Focusing on shareholder value is the world’s dumbest idea.”  http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/#641be7422224
  • Second, complaining about the financial demands is too often an excuse not to do the right things.
  • Third, the process I described is almost always much more efficient and effective than what people were doing when we first engaged with them. As a rule we find that less than 50% of their efforts have any value for the enterprise (we don’t decide; they decide after our workshop gives them a framework for doing that)
  • I always say that 100% improvement are possible. I actually think the potential is much more than that because there are no limits to creativity and innovation.
  • At SRI we went from failing to creating billions of dollars of new economic value. You can’t really compute that improvement, but subjectively it was more like 100X..  It was what saved SRI from going away.

• Does respect for people lead to trust, or is trust a prerequisite for respect?
  • Respect is one of the starting points.
  • Integrity, generously of spirit, and sticking to your commitments are also critical.
  • Over time you earn trust. Trust can be lost with one bad slip up.  Without trust, intense collaboration is impossible. 

• If you used metrics to define resource levels, did you have people “gaming” the system to secure what was needed to develop their ideas?
  • Gaming the system was not a significant issue because we used “value-creation forums,” where people continuously stood up and presented their NABC value propositions in front of their teammates and others. Everyone can immediately see the gamers, and they can immediately sense that their colleagues are seeing through them too. Staff either step up or leave.
  • Perhaps one of the surprising things we discovered is that with only a few exceptions, everyone stepped up. People want to do great things and achieve.  You just need to give them the opportunity in a supportive environment that adheres to the fundamentals of value creation.

• What is the role of a champion?
  • They drive the value proposition and succeed – no excuses. I listed other responsibilities in my talk.
  • Our rule was, “no champion, no project, no exception.” We were not perfect but that became the expected norm. It made a huge difference once everyone understood that we had no choice but to ask for that in such a competitive environment.

• In Agile, the Product Owner is often perceived as the champion. My experience is that they normally fight for the status quo. How does Champion fit in in Scrum?
  • In many kinds of businesses, the end customer must be a champion too. Without that you can’t be successful. For example, in web design or corporate B2B situations.  In those cases, the product developer and end customer must be champions working productively together.  If you want to achieve great things, all the major players have to want to achieve that end result too.
  • For many major opportunities there is no single end customer: there is an important market and customer opportunity with many customers.  In those cases, the process I described is much more efficient and successful.  You still iterate with the end customer but you are attempting to address a major market pain point, not an individual customer.  

• Did using language like “no excuses” create a challenge to an environment of learning, where reflection and understanding are inherently important?
  • It might if we did not use “value creation forums” and our other practices that supported and encouraged people.
  • No excuses came with the opportunity to learn essential value-creation skills, obtain organizational support, and leverage resources across the enterprise.
  • It was mostly seen as an exciting, positive experience where people were judged on merit; not on their advanced degrees or their positions in the company. They were given the opportunity to do meaningful work – and that is stimulating and empowering.  If we didn’t support them, however, it would not have worked.  

• What questions would you ask at lunch with staff that was not (the expected) “Tell me your value proposition”?
  • First, I don’t know why more senior managers don’t go to lunch with their staff.  You have to eat, why not spend 45 minutes in the cafeteria every two weeks with people on the front lines?  Spending time with the staff allows you to: 1) learn some “ground truth” about the company from the actual workers, 2) communicate your vision and strategy, and 3) show the staff that you are open to new ideas and that you care about them.  You might say, “But I can only talk to a few dozen people so why bother?”  That is completely wrong.  The world will spread at the speed of light.  If you sit regularly with the staff everyone will know about it and they will admire you for it.  You are also building trust.  It is like putting money in the bank for when you need to call on the staff to do something extraordinary.  
  • I always talked first about where they came from, what was important to them, what did they want to accomplish?
  • The initial discussion about value propositions with new staff could be a bit uncomfortable for some. The idea was to take them through the concepts to prove that they could do it.
  • We often had fun. I was not there to pin them to the wall. Just the opposite, it was to encourage and support them.  Of course, in the process I was also communicating how fundamental these skills were for their success as well as our customers and SRI.
  • I think after people got to know me they understood that I really cared about them, and I wanted to make sure they would be successful. I always pointed out that people with these skills were among the rarest and most valuable professionals, wherever they worked and for as long as they wanted to work.  Helping people develop these skills is like giving them a big, lifetime gift.

• Did a culture of huge motivation and 80-hour work weeks isolate people within the the organization that decided to spend more of their time involved in out of work activities (e.g. parenting)?
  • We balanced those issues. No one was asked to work those kinds of hours all the time.  But sometimes it was necessary.
  • When we created the U.S. HDTV system it required several months of that kind of effort in a separate “skunk works” building. If the people on the project didn’t see it as the opportunity of a lifetime, commitment like that wouldn’t work for long in America.
  • When people have personal issues you must also be sensitive about them and work to help address them. Our great CEO at the time, Jim Carnes, flew in the wife of a just-married colleague for a conjugal visit. The entire team was inspired by that.  It proved that Jim was watching what was going on and that he cared.  That means a lot.

• When at lunch with staff and questioning their value propositions, is it the individual’s personal value proposition, or their perspective on the larger company goal?
  • Yes, as stated above, the usual way to start was a general discussion of their background and goals.
  • Then we focused on their value proposition. Inevitably we would discuss how important our value creation process was for our customers, staff, and SRI.

• How did you align staff functions such as finance and IT to create value for the end customer?
  • We used NABC value propositions for almost all activities. Were we perfect?  No.  Did everyone have a complete understanding of value creation?  No.  That is not possible and it is not necessary.
  • But everyone knew that we would always discuss the customer need and whether it was important or interesting.
  • Overall, the customer focus from using NABC value propositions was transformative.

• Who from the individual Scrum team will participate in the Value-Creation forums? Does that change over time?
  • First SCRUM teams are not exactly what I described. But some of the ideas are similar.  For example, our teams were mostly self-forming, although not exclusively.
  • In our “value-creation forums” the participants included team members, IP and BD professionals, and others with expert knowledge. The members at the forums changed as the projects evolved from R&D to major business opportunities.  For example, on our new-ventures value-creation forum we had 7 to 9 of the most successful VCs here in Silicon Valley.
  • Team members changed over time as initiatives developed.
  • The goal is always to learn and create fast. Include those who can best help you do that.

• What would you start with: set a number of values/principles for the employees OR start with changing the system? How does one follow the other?
  • They go hand in hand.
  • We involved everyone in the larger discussion and our strategic direction. We started changing the system by working with a small number of early adopters.  We leveraged their successes to engage the larger enterprise.

• We have a lot of quantitative data about our customer, none the less, a manager I work with argues that whatever the customer says is not what they really want. However, the customer keeps the knowledge about the numbers to themselves. How can I convince them that EVERYONE needs to know the customers’ needs?
  • That is a common problem with no simple answer. In general, it is true that customers don’t know and/or can’t express all the needs they have.  They can’t because they don’t know what they don’t know and because they don’t know what is possible.
  • For example, most customers don’t fully appreciate all the different forms of “convenience” that are important to them. Steve Jobs was a master at uncovering these “unknown needs.”
  • Iteration with customers is fundamental.  Asking what they wish they had and watching them helps, but that is not enough either. They often must be shown the proposed new solution.
  • We never visited a customer without bringing them potentially valuable new ideas (you always have to “bring roses” – something of value or you are wasting their time). These ideas provided another way to show our commitment and allowed for additional customer engagement.  Of course if those new ideas didn’t stimulate a productive conversation, they were immediately dropped.
  • We also use a tool called “Value-Factor Analysis,” which allows a semi-quantitative way to represent the types of value that might be delivered to a customer. Writing down all the different forms of value you can imagine in a spreadsheet and presenting it to a customer for their response, often gives extremely valuable feedback about what and what not to do.  In the case of people not sharing data or not sharing competitive information, we have found it particularly valuable.
  • In other words, you have to do all of the above. Love your customers and aspire to surprise them with what we called “overwhelming value.”  10% improvements are not enough. 
  • If you can’t find a way to work with them and have them share their needs, it is a slog. Usually there is a way.  As a champion, your job is to find it.  No excuses.

• What are good resources to continue to learn about (or download) the Value Creation Handbook?
  • Our book, Innovation: The Five Disciplines for Creating What Customers Want describes the fundamentals of value creation and how we used them to transform SRI (Amazon at https://www.amazon.com/Innovation-Five-Disciplines-Creating-Customers/dp/0307336697/184-0575907-1249535?ie=UTF8&*Version*=1&*entries*=0 ).  See also the great book by Norman Winarsky and Henry Kressel about SRI’s venture process, If You Really Want to Change the World (Amazon at https://www.amazon.com/You-Really-Want-Change-World/dp/1625278292?ie=UTF8&*Version*=1&*entries*=0).
  • We give Innovation-for-Impact (i4i) workshops to leading companies and government agencies around the world.
  • Currently we are working with several of the world’s largest companies, two startups, the U.S. National Science Foundation and the Singapore National Research Foundation. In addition, I am on the National Academy of Engineering team to redefine U.S. innovation policy for large, multi-disciplinary initiatives.
  • If you are interested or have thoughts, drop me an email at curt@practiceofinnovation.com.