Book Review: Relentless Innovation by Jeffrey Phillips

    By: PDMA Headquarters on Feb 23, 2012

    Innovation: Nature or Nurture?

    Psychologists have a long running debate about what shapes human behavior. A leading theory suggests that two significant influences dictate how we act, how we respond to situations and what shapes our world view. These two factors are the famous, or infamous, nature versus nurture. The question many psychologists ask about human behavior is: how much of it is simply innate, or genetic, and how much of it is influenced by the conditions that surround us?

    It’s been shown that identical twins, who are separated at birth and who have no often exhibit similar decision making and behavior, even when their home lives were markedly different. These findings suggest that there is a strong genetic component that shapes behavior. However, we know that the environment and conditions in which a person lives also shape the way individuals think and how they respond to certain situations. So a constant question remains – how much of our attitudes and behaviors are influenced by nature, and how much by nurture?

    If people are subject to this nature versus nurture dichotomy, could it also be true that businesses are subject to some of the same forces? Could much of the behavior of a business be chalked up to its genetic fabric? Does the environment within which it competes dictate actions and behaviors? I believe the answer to both of these questions is “yes” and what’s more, these two factors determine shape how firms think about critical strategic needs, especially needs like innovation. What differs between corporations and individuals, however, is the responsiveness to the environment. Firms are far more reactive and responsive to the market, especially as measured by profits and short term financial goals. While innovation is in the genetic material of every firm, it is often superseded or ignored in favor of aligning to the environment. In the battle of nature versus nurture, in the business world nurture wins time and again.

    All firms were once innovators

    All firms have in their genetic code the basis for entrepreneurship and innovation. Every firm, in every industry and geography was once an innovator, starting from scratch, challenging larger competitors. So every firm has some genetic material that links back to the innovative birth and early growth that was driven by innovation. No matter how old the firm is, or how large, or how complacent, within the genetic makeup of the firm there is a vestigial innovation capability which can be renewed or recovered.

    As firms grow and evolve, competitive forces, new market entrants and substitutes to existing products and services require the firm to respond. As a firm grows, it has more to defend and sustain. These sustaining and defending pressures begin to overwhelm the innovative capabilities. At some point, often early in the life of a firm, a threshold is crossed, in which innovation becomes far less important than defending and sustaining existing products and services, so behavior is much more influenced by the environment rather than by nature. Increasingly, many firms are recognizing that they’ve lost touch with the innovative capabilities that were used to start the organization, and that tools, methods and management philosophies have constrained innovation while defending and sustaining an efficient operating model we recognize as “business as usual”.

    Business as usual

    Every firm has a set of formal and informal processes, decision filters and investment criteria meant to sustain an efficient operating model, what we call “business as usual”. Business as usual represents an efficient, effective organization running on all cylinders, using inputs and resources effectively to minimize waste and variance and to achieve consistent quarterly results. New management tools like Six Sigma and Lean are constantly improving and reinforcing the existing business as usual process, honing it for greater efficiency. Improved effectiveness and efficiency means the firm can achieve the same goals with fewer resources, cutting costs and increasing profits. An efficient, effective operating model appeals executives and middle managers. Executives demand that the organization do “more with less” and sustain profits, while middle managers are rewarded and compensated for managing efficient, effective processes and achieving short term financial goals. Increasingly, middle managers have become the protectors and defenders of the “business as usual” operating model.

    But many forces are at work in the marketplace. Customer expectations change rapidly. New entrants introduce compelling new products and services. The pace of change is ever increasing. All of these factors mean that to remain competitive, firms need not just efficient processes but a constant stream of new products, services and business models. But while the existing “business as usual” models and methods are well-understood, well documented and effectively supported, innovation introduces requirements that work against an efficient, effective business as usual process. Innovation is, by definition, risky and uncertain. It distracts key people from their important day to day responsibilities and creates inefficiencies and often requires experimentation and prototyping which may lead to products or services that aren’t “successful” in the marketplace. Innovation outcomes are unpredictable at best, some resulting in spectacular failures and some in valuable successes. In a model accustomed to predictability, efficiency and effectiveness, innovation is the proverbial square peg in a process full of round holes. This dichotomy seems to present a mutually exclusive choice – excellent efficiency at the cost of little innovation, or poor effectiveness punctuated by moments of significant innovation. Neither of these outcomes seems particularly attractive. But this is a false dichotomy, as demonstrated by the firms I call Relentless Innovators.

    Relentless Innovation

    In my book Relentless Innovation I make the argument that the two most significant factors standing in the way of innovation are business as usual and middle management. This recognition combines both an insight and a major barrier. An effective business as usual process closely maintained by middle managers drive consistent short term financial achievements. A strong business as usual culture, however, resists change and rejects innovation as too risky and too uncertain. The very factors that help your organization achieve short term profits will be the biggest barriers to long term innovation success. It doesn’t have to be this way.

    Previously I suggested that efficiency and innovation aren’t mutually exclusive. This assertion is revealed to be a myth when examining the firms I call Relentless Innovators, those who constantly generate valuable ideas, firms like Apple, Google, Proctor&Gamble , 3M and Gore. These firms share only two interesting characteristics – they are very innovative, and have been so over time, and are also at least as efficient in the use of inputs and resources as their direct competitors.

    They accomplish sustained innovation through an operating model I call “innovation business as usual”. This moniker suggests that innovation is an integral part of business in these firms, rather than an occasional distraction. These Relentless Innovators also leverage middle managers who balance the needs of efficiency with the demands for innovation. In this regard they are returning their firms to a healthy balance between innovation and efficiency.

    Deeper Analysis

    In Relentless Innovation we examine how so many firms, which have innovation in their DNA, have become so resistant to innovation. In many ways, we have met the enemy, and he is us.

    Over the last twenty years good management practices and tools have slowly chipped away at the innovation DNA, replacing innovation with a focus on efficiency and effectiveness. Tools and methods like outsourcing, Six Sigma and Lean have dramatically accelerated the focus on efficiency and effectiveness, while over the same period little attention was paid to innovation tools and capabilities. Today many firms have armies of Lean and Six Sigma consultants, and pride themselves on productivity and efficiency that many economists find hard to believe, while their innovation capabilities have withered. Tools meant to improve efficiency and effectiveness have instead created barriers for innovation at the very moment when innovation is needed most.

    In Relentless Innovation I look at why so many firms have become one-sided, overly focused on efficiency at the expense of innovation, and I provide a roadmap that will help your firm shift its focus to achieve balance between efficiency and effectiveness for the short run and innovation for the long run. Relentless Innovators demonstrate that this balance can be achieved, and increasingly only the firms that are both efficient and innovative will succeed.

    While psychologists will continue to debate the nature versus nurture question for humans, I believe it is relatively settled for many firms. While all firms have some innate innovation ability, the environment and rewards based on efficiency and short term profit have overwhelmed the innovation capabilities. We need to recapture and repurpose the innovative genetic material that exists in the company and within the people in the company, and reduce the pressures imposed by the market and the expectations of short term results that constantly stymie innovation efforts. Any firm can rekindle the ability to innovate if it is willing to manage the expectations and pressures placed on it by the competitive market. Relentless Innovators – 3M, Google, P&G, Apple and Gore – demonstrate that it is possible to excel in innovation while remaining efficient and effective. They do this by creating an operating model attuned to innovation which is supported by engaged middle managers who balance the needs between innovation and efficiency.

    About the Author

    Jeffrey Phillips leads the innovation consulting team at OVO Innovation. OVO works with Fortune 500 organizations to create innovation capacities by defining and building innovation teams, designing and developing internal innovation processes and developing open innovation skills and capabilities. OVO has developed successful innovation programs for firms in a range of industries, including financial services, high technology, insurance, software, consumer goods, pharmaceuticals, and government agencies.

    Jeffrey writes the popular Innovate on Purpose blog, providing insights and perspectives into innovation methods, tools and challenges. He is the author of Make us more Innovative, a book which defines OVO’s Innovate on Purpose methodology. Jeffrey has also contributed to several other books on innovation, including A Guide to Open Innovation and Crowdsourcing edited by Paul Sloane. He is regularly published on innovation sites and management journals such as InnovationTools.com, Innovation Excellence, InnovationManagement.se, Texas Enterprise and many more.

    Jeffrey is a recognized speaker on innovation topics, and has led innovation talks, workshops and programs in North America, Europe, the Middle East and Southeast Asia. He has led talks for corporate boards, industry consortia, innovation conferences and in a number of major universities.

    Released: February 23, 2012, 4:00 pm
    Keywords: PDMA Blog | Book Review | Relentless Innovation


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