Innovating as if your Future Depended on it.

Peter JonesInnovation, Wu Wei

So we’re in an everlasting downturn and nobody is really sure what’s next in store for any industry, newspapers, broadcast, publishing, financial, automotive, retail, construction, food production, energy, healthcare. If the rational, reasonable Western world is in such a fit of uncertainty, we clearly need to be innovating our way forward.

Designers have always been up to this task, although we often are not asked. Henry Dreyfuss started his design office during the Depression, and was never wanting for transformative projects. His work defined the look of that bold era. And George Nelson was quoted in June’s Metropolis as having said:

“Design is returning humanity to society. If design doesn’t work for people, then there isn’t much point in doing it. I’m not so much interested in designing things as I am systems. That is what is important.”

So what will our design legacy be for the post-millennial “long emergency?”

Booz delivers a set of 6 guidelines on sustaining innovation for senor management, Innovating through The Downturn: A Memo to the Chief Innovation Officer.

“Yet, past history also shows that the greatest innovation can come during periods of severe economic stress. Television, xerography, electric razors, FM radio, and scores of other advances were produced during the Great Depression. Companies such as DuPont, which in 1937 was generating 40 percent of its revenues from products introduced after 1930, pursued innovation not only to survive the Depression but also to set the stage for decades of sustained profitable growth.”

One of the things I’ve learned is that such simple presentations can apply to design strategy and experience design equally well, if translated. While these tips are not strategic in the sense of long-term organizational alignment, if followed they would create what we might  call operational thrivability. In other words, you haveto operationally survive first before you can thrive through the next era. Let’s try these points out from a design thinking point of view

1. Move with your customers.

“Build and test scenarios that seek to understand unstated and as-yet-unrecognized customer needs in the near and long terms. Use the insights they yield to shift investments to projects that help customers cope with the recession, and position your offerings to satisfy their needs and desires in the upturn.”

If innovation takes a page from user experience, why not extend the method? A large organization should shift its approach to sensing the environment, and not innovate ahead of their adoption. Industries reliant on retail strategies will find their business models vulnerable to customer intervention. Following the customer’s needs and leads will allow the firm to discover the changes occurring in market behaviors. If lucky, they can respond appropriately when the best timing presents itself.

In a serious recession, customers move quickly to hedonic switching behavior, or finding cheaper ways to satisfy a preference to which they may have become accustomed. McDonalds offers coffee products “good enough” to replace Starbucks for many.

Product and service decisions must anticipate the future world that will reveal itself once the economic dust settles. In the meantime, innovation teams should discover the customer’s world more directly, when possible. Think onsite visits, not surveys, at least to inform the organization of the types of changes happening in the real economy. “Ideal world” scenarios are helpful to understand as aspirational, but nearer term decisions must capitalize on current real world needs. Sustainability also means surviving, and lasting long enough to be sustainable. So follow the customer during the downturn, and lead them out just before the times change again.

2. Kill weak projects.

First, you must have organizational agreement on the definition of a weak project. While it is always important to end draining projects, how much more so when cash flows are ebbing. Think of it this way – while a large firm can afford innovation experiments, projects that are not organizational commitments are wasted resources that can be concentrated on the next big win. The weaker projects, even if they have value, are ideas that can be better exploited by smaller entrepreneurial firms anyway. If you want to be in the business they grow, you might consider tracking and buying the best innovator in that new market or technology.

Projects should be assessed on various models of return, on revenue, equity, cost structure, and rapid growth in new markets. If your strategy changes in a few years, a cash cow can always be sold or spun off.

Booz suggests assessing projects against their fit to strategy. That’s fine, as long as the firm’s strategy is truly winning. In transition times like these, a business strategy drawn up before the downturn may be quickly outdated. If so, executives may be the last to know, because strategic time scales are insensitive to rapid shifts in customer behavior. A 3-year old business or innovation strategy may reflect values and implicit assumptions that made sense before markets shifted. While considering weak projects to offload, you may also evaluate and reenvision strategies, and consider replacing a weak game plan. An innovative firm may choose to play an emergent strategy until a way forward with a clearer future becomes clearer.

3. Act to retain key talent.

“Regardless of the day-to-day pressure, map out a strategy for how your core talent can be frequently and intimately involved in developing and executing future R&D strategies and capability building efforts.”

It may be too late. Many of my readers already left their agencies or weaker firms a year or so ago, before the inevitable job cuts and increased hours imposed on the walking wounded. The best talent always leaves first, before other team members even know their best clients are dropping off. Large product firms with a solid base have more time to negotiate, but they are also more likely to misunderstand this point.

Also, consider your key talent your creatives and innovators, not the executives. My observation is that brand new executives have huge motivation to perform well, and can be provided with meaningful positive incentives to learn and adapt to the strategy. Creative staff, on the other hand, are key to delivering on innovation. If you lose innovators, you cannot replace them at any price. Consider that they have also been trained for years on your firm’s technologies and competitive routines that make delivery happen. Depending on tech and product complexity, new UX, creatives, and product managers may take up to a year before they can operate at that level. If they are really good. If they were just the “best available,” good luck.
4. Double down on advantaged innovations.

Booz recommends: “Now is the time to accelerate and optimize new products and technologies that are sure to deliver market advantage. If necessary, front-load resources and adjust your development cycle to get to market in time for the upturn. As always, pay particular attention to the features that customers value most and do not take your eye off quality.”

Of course, when is this NOT the case? Again, it depends on your industry and whether it makes strategic sense to attempt to time the upturn. Significant tech advantage may take years to develop and refine, so what is your confidence and expected return in acceleration to timing an upturn? What if the upturn were – ahem, late? Nobody really knows when that upturn may happen, or what it may look like in this cycle, whether secular bear market or sector bull. Some of the industries I have consulted in – automotive, enterprise software, publishing, telecom – have very uncertain future markets. Can we forecast the level of consumer demand in 2-3 years (or longer) that would energize these sectors?

Perhaps significant technology innovations should be trialed with lead users in smaller, emerging markets with modest platforms that fulfill a single well-defined requirement. Set up a portfolio of experiments with complementary services and learn from early tests in this lower-demand, lower-stakes environment. In this way, when increased revenue opportunities return from real consumer or business demand, your early platforms will be available, branded, and ready to ramp. In theory.

Also, this step also confounds the classic technology design trade-off between time-to-market and quality. It appears their call is to focus on timing the upturn, to be prepared for the possible uptake and then, if you can, “do not take your eye off quality.” This trade-off can never be presented as a generality. In some domains, quality is all that counts, and having fewer features of high quality or quality content makes all the difference. There are no general strategies.

5. Aggressively scout technology.

“If you have buying capacity, speed up the scouting process and develop a broader partner and supplier network to identify and vet acquisition opportunities. If you do not have the resources in place, consider using short-term, ad hoc teams to scan opportunities.”

Why not? Emerging tech firms and their licenses are cheaper now than ever, and in a deflationary environment, where cash flow is weak in many sectors, you may have time to scout longer and negotiate for the best. This corresponds to #2 – killing off weak projects. You want to understand the potential in technology options available in the planning term.

However, this is another situation where technology appears to be positioned to drive strategy. Scouting as opportunity sensing should not be confused with locating platform technologies that support a next-generation innovation strategy.
6. Fix innovation capability gaps.

“Now is the time to undertake a sober assessment of the strengths and weaknesses of your innovation system. Fix the capability gaps now so that you can launch projects with fewer resources.”

This is great advice if you can do it. A sober assessment is difficult to accomplish, because most people are too close to the organization. Few organizations actually have a real innovation system, as it takes years to invest in practices, experiments, labs, designers, and to convert tacit knowledge to new routines. You can’t go wrong with a Christensen assessment: What are the Resources, Values, and Processes your organization requires to go forward with a next-generation innovation?