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The Math Behind the Innovation Process

This is part of my reflections from the OpsInsight Forum in Boston.

One of my favorite presentations was done be Dr. John Evans, Vice President of Business Innovation, from Lockheed Martin.  The presentation wasn’t only about innovation but how to look at the innovation process and the math behind it.

Dr. Evans displayed the graph below.

The graph shows a high uncertainty of success means a larger hurdle rate to clear for the innovation to be profitable.  Companies should work towards removing uncertainty as much as possible to lower the hurdle rate for the innovation to be successful.  This does not mean that all uncertainty can be removed.  Companies need to be acutely aware of the uncertainty in new innovation in order to give the idea the best chance for success.

Dr. Evans discussed the typical stage gate process for innovation.

(click on image to enlarge)

What the graphic shows is a classic Marchov Chain.

As an idea moves through the stage gates it has an 80% chance of passing.  The costs are split evenly between the stages.  This means there is only a 51% chance the idea will pass all the stages and $10 million will have been sunk into the idea.

Dr. Evan’s point was the innovation process should be very light on cost on the front end but very hard to pass Stage Gate 1.  This allows companies to save resources on ideas they believe will actually deliver.  What innovation process tasks can be moved to the front so the cost is under $1 million (compared to the $3.3 million above) but only have 20% chance of passing the stage gate.

The best is front load the process with high risks, but low costs.  As the idea moves through the process, the gates are easier to pass.  This helps to prevent adding a lot of cost to ideas that don’t make it to the market place.  The idea has a higher chance of success in the market place and removes more uncertainty from the equation, moving the idea more to the left in the first graph.

The innovation stage gate process and how a company evaluates ideas adds value more than the idea itself.  The innovation stage gate process is critical to removing market place uncertainty from an idea.

I probably did not due Dr. Evans justice in his thoughts but I tried.  It was very interesting and provide a lot to think about.

Asking the Right Question to Create Innovation

This is part of my reflections from the OpsInsight Forum in Boston.

One of the breakout sessions that I attended at the OpsInsight Forum focused on innovation.  David Silverstein from BMGI led a great discussion on how to ask a different question in order to stir new innovation.

(Side note: He had innovation in his presentation…be didn’t use any slides.  It was a per discussion.  Almost like you ran into him in the hall.  Very well done.)

Here is the simple question that David presented to stir the creative juices: “What are wee hiring the product/service to do?”

David then gave a couple of examples to drive home his point.

Example #1:

In the 1880s, candle makers wanted to be more innovative.  If they wanted to improve, what were they working on?  Making candles that don’t drip?  Scented?  Candles that burned longer?  Burned cleaner?  Easier production processes?

Now ask the question, “What are we hiring the candle to do?”

Answer: Create light.

Asking that question, allowed others to invent the light bulb.  Unfortunately, the candle makers were not part of that innovation and their business was significantly effected.  Had the candle makers asked that question, maybe they would have invented the light bulb.

Example #2

Today if you go to a lawn mower producer and ask about what innovations they have you will get different responses.  Some of them might be: Developing a cleaner fuel engine, self-guided mowers, or mowers that run like the Roomba vacuum.

What if the lawn mower producers ask the question, “What are we hiring the lawn mower to do?”

Answer: Cut the grass because it keeps growing and we want our lawns to look nice.

So what if the grass didn’t grow?  There would be no need use a lawn mower and our lawns would still look great.  Well, scientist have already designed no mow grass.  (Links to articles here and here.)

The candle makers and lawn mower producers are focused on the product and not what the product is hired to do.  In one case, candle makers became a rare breed.  For lawn mower producers it is a matter of time.

The other significant thought David talked about was connecting the dots to create something innovative.  He referenced the phrase, “Connect the dots.”  When you connect the dots you have thought of something in a new or innovative way.  The more dots you have in your head the easier it will be to connect dots.  Dots in our head is information and learning.  If we continue to keep learning, it will be easier for us to eventually connect the dots.

The best time to connect the dots is between 10pm and 6am.  During our sleep.  At that time, our brain is accessing everything we have learned, read, been taught over the years trying to connect dots.  The brainstorming session is just the extraction of those connections you have already made.  That is why so many times when we are relaxing or sleeping “something just hits us.”

It was a very interesting presentation/discussion around innovation.  A new question to drive innovation.

Innovation…It’s Not Just for Products Anymore

Innovation is one of the key buzzwords nowadays.  When you hear the word innovation, what do you think of?  Most people think of product or something tangible.  And that is what a lot of companies are hanging their hat on.

But innovation isn’t just about products.  Innovation is about process too.  Innovation is about setting up a process in a new and distinct way.  Setting up a process that can create a step change in results taking your business to a new level.

I’m not talking just about manufacturing processes, but also business processes.  If you can have an accounts payable process that is fast and easy would banks be willing to loan your company more money?  Would you even need to borrow money?  What about a quick, reliable process to assess the quality of suppliers?  How would that help?

Next time your company talks about innovation, bring up the idea of innovative processes…not just product.

SportsCenter Has Killed U.S. Manufacturing

A few weeks ago, there was a discussion on one of the Linked In groups.  The question to start the discussion was “How do we make manufacturing sexy again?”  This question really struck a nerve with me.  I starting thinking, “Why does manufacturing need to be sexy?”  Then I realized there is a lot of similarity between sports and manufacturing in the U.S.  OK, so I am being a little dramatic about the affect SportsCenter has on manufacturing but there is a great parallel between the two.

We are a culture that suffers from the “SportsCenter Syndrome”. We crave the new and the sexy and forget all about the fundamentals and the foundation. Manufacturing is not sexy.  It is a fundamental. Everyone wants to get caught up in the flashy new idea and talk about innovation like watching the high flying dunks and long three pointers on SportsCenter. Meanwhile, the companies that are sustaining growth and manufacturing here in the U.S. are companies that continue to set good screens, make the extra pass, play defense and do all the basic fundamental things to manufacture a product. Even in sports, the teams that can’t execute the fundamentals don’t end up winning championships or sustain long term success (see Cleveland Cavaliers).

As a society we are becoming enamored with the flashy and sexy new thing.  We forget about manufacturing and the foundation it built for our country.  Manufacturing combined with innovation was how the U.S. became a super power.  During WWII, we created new and innovative weaponry, vehicles, and supplies that were built here in the U.S.  It helped us when the war.  When the war was over, everyone came home and we put the resources we had to building infrastructure to our country.  The interstates, suburbs, cars, etc…  There was  balance between manufacturing and the innovation that was coming about.  Without a good blockout and rebound, the star can’t receive the pass for a break away dunk.

I say we don’t try to make manufacturing sexy, we realize it is fundamental and it is time to get back to the fundamentals.