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January 10, 2006

Innovation, Invention, and Interventions for Improvement

In the post-cost-cutting era, no improvement is more popular but elusive than gaining "sustainable competitive advantage."

Any one of its three parts is hard enough to deal with. And though their combination is even more daunting, it is practically irresistable. Why? Because as a justification for whatever else we do, it's pretty hard to beat.

We especially love the idea that we can do it over and over. And after all, what point does our old favorite continuous improvement have if it does not fortify the maintenance of advantage?

On closer look, just agreeing on what the phrase "sustainable competitive advantage" really means is a good trick in itself. We have to parse it carefully to be sure we go after the right problem...

For example: each part of the idea merits its own auditing: Are we competitive? Is our competitiveness creating an advantage? Is the advantage sustainable? This is the typical line for performance evaluations.

But some see the problem a bit differently: Do we have an advantage? Is the advantage making us competitive? Is our competitiveness sustainable? This is the line for launching new organizations, products, or ideas.

Today, the second interpretation has really come into its own, with "Innovation" being the major mantra. Is innovation always justified?

I. Change how you Change

On the surface innovation certainly seems like a good development. In real improvement, changes are always made and the changes have to matter. With an innovation, one might either change the rules a bit and scoot ahead of "the pack", or simply "break through" the status quo to hit a goal line before others do.

But most often, improvement calls for a change that is not even an innovation. Because we work ambitiously in increasingly complex circumstances, what we make is usually more likely to demand our attention to incumbent defects, omissions and errors. Also, due to shifting circumstances, improvement may not be significant if it is rendered only ephemeral. These points -- complexity and variation -- suggest that improvement should be tackled strategically.

As a strategic problem, improvement is challenging to solve mainly due to the way complexity and uncertainty affect the design effort for the solution. Navigating through the challenge, we respond to complexity (choices) and uncertainty (surprise) by making changes that can easily leave things different but not necessarily better. So how often can we say that innovation is strategic?

All innovation is pursued under the umbrella of improvement. To establish innovation as the most likely capture of value from action, the whole issue of what is "better" first demands some up-front declaration of what is really needed -- from which we can see innovation not just as a capability, but more importantly as an opportunity to solve the "right" problem.

II. Cause and Effect

The ambitions of having a "disruptor" or a "breakthrough" have often stayed separate, although without deep thought it might appear that they both lie at the end of the same "path of improvement". That is, we take it for granted that we know the path : innovation is a premeditated effort to produce something unprecedented.

But there may be some debate -- for example, as to whether a given "innovative" effect was intentional or accidental; that makes us look back for differing causes.

An innovative effect is often mainly a matter of using something old in a different way, or something new in an old way; along that line, accidents and luck both count as sources. But those point us at the more general idea of discovery -- what many people could later call innovation.

Against the status quo, a discovery is notable precisely because it is a change. But often the discovery of some new usage or effect remains only with the discoverer, especially if the discovery held no importance to the discoverer beyond the moment that it occurred.

Meanwhile, as they say, necessity is the mother of invention. Contrasting with discovery, invention is considered to be a more explicitly intentional effort for a certain lasting effect.

Of the two paths, invention is of particular noteworthiness to self-consious planners and innovators, but "invention" and innovation are only sometimes the same.

We politically reserve the term "innovation" for changes that impact arenas much wider than the laboratory of the change-agent -- in more or less the same manner that we reserve the term "IP" for referencing a situation that presumes distribution of content beyond the creator. This also affects our sense of where to get innovations.
And whether the innovation really means anything in terms of improvement will depend on the reception it gets in the arena to which it is delivered.

Not all arenas will be equally hospitable to the innovation; so (as all marketers know), if we want to get real value from the innovation, we first do a little forecasting of who cares about the innovation's impact.

Thus, the idea of attaining sustainable competitive advantage from innovation should be looked at in terms of confidently identifying where there is a need for certain kinds of change.

III. How new gets better

To help with the identification, we need a high-level view that tracks the "value chain of change" underlying an innovation's effectiveness. What happens? How do we make it happen when we want? Where do we want it to happen? Why?

Overlaying that sequence, we bring our three-part "improvement" goal: sustainable competitive advantage. Typically, sustainable signifies control; competitive signifies effective; and advantage signifies leverage -- so when the sequence above works best for us it supports all three parts.

Intentional improvement therefore presumes attention to how each point in the chain ought to support or increase the final control, effectiveness and/or leverage needed.

IV. Getting There from Here

Planned improvement always presumes control of change itself, while bringing a perspective that gauges the difference between the current position and a future position. It idealizes the path from point A to point B; but in real life, other distracting stuff usually happens along the way. It becomes necessary to anticipate where that stuff can come from, so we have to be able to understand that the "single path" results from our exposure and reaction to multiple influences -- the combination of why we do what we do, and where we are when we do it.

Planned improvement works hard to integrate those two influences and thereby control change. The following illustration shows how the corresponding issues of execution and position are combined in a single view.

In the planning sense, this picture shows the operating environment as a "current state engine": a set of "parts" -- material elements and action components -- that are manipulated in a defined change.

- Execution is composed of the managed interactions between the parts.
- Position (breadth and locations) is composed of the scope and range of the effects of that management.

That means we can directly relate position and impact. Since value is attributed to the impact, innovation's path to value goes through "position".

But since position is a result of execution, we have to look at execution as a way to understand innovation.

V. Paving the Path

In managing the state of operations, there is continual decision and action.
- Decisions select material elements -- i.e., Functions, Resources and Costs -- that determine the scope of what will be done, how, and to what extent.
- But using the action components -- i.e., Implementation, Allocation and Regulation -- we translate that scope into range , thus determining where operational impacts will occur.

By that same arrangement, the entire change value chain is attentively traversed. Therefore, at this general level, there is an inherent ability to do new things.

But management first sees to it that the action components give the material elements a regular interaction that approaches a "steady state". In each practical iteration:
- Implementation relates Functions and Resources ;
- Allocation relates Resources and Costs practicall; and,
- Regulation, closing the loop, relates Costs and Functions.

In designing a steady state, functions are designated first, then resources are proposed to support the functions and costs are derived to support the resources. Otherwise, the functions are not seen as viable and they get revised. These selections may be finalized through trial and error or by investing adequately in already known designs. Bringing about this alignment for the purpose of achieving a targeted future state is what the design of the controls on change --i.e., the design of the solution -- is supposed to do. The future may or may not need to be different from the present.

When change is intentionally pursued:
- management first alters the arrangement of functions, resources and costs -- manipulating or intervening by using implementation, allocation and regulation. - If that doesn't work, then new selections may be made in functions, resources and costs.

The designer can face challenges to both the activities and materials intended. They typically crop up in the form of complexity and uncertainty, which may force trade-offs and risks -- some of which might mean that the ideal outcome is compromised although still remaining useful. Naturally, management wants to minimize the need for compromise.

Invention within design is often all about finding a design that can overcome the customary challenges. The ambition of an innovation is all about finding a design that gets to the solution without the customary challenges.

VI. Likely Obstacles

Acknowledging that there may be multiple iterations (cycles) of effort needed, the general idea in "improvement" is to navigate from current point A to future point B, minimizing interruptions and tangents.

Invention and innovation may play big roles in getting to point B, but of course their occurrence will be helpful only if they produce differences that really matter while not unreasonably increasing risks.

We can't underestimate the importance of risk, because it can increase uncertainty and complexity, or even simply prevent change. Risk is perceived and real, and comes in various flavors and degrees.

For example: in the "continuous" improvement scenario, invention is a challenge to the composition of an incumbent plan of alignment. Literally, the manager may see the invention and ask, "what am I supposed to do with this?" and/or "why should I allow this?" Notably, invention can suggest that current efforts are solving problems the wrong way. Invention and management work most directly on the functions, resources and costs.

The effort to streamline and ensure the alignment similarly means that innovation itself is a challenge -- to accountability. Innovation may alter or even contradict the terms of the incumbent or legacy design, calling the design's interconnections (and/or their customary effectiveness) invalid for the need of most current importance. Innovation can suggest that current efforts are solving the wrong problem. Innovation and accounting work most directly on the implementations, allocations and regulations.

Finally, even improvement itself can be misguided. For example, one principle that has been proven in many situations is that "perfect is the enemy of good enough." This reflects the challenge of correctly prioritizing the goal of an effort.

Thus at every level of our intention to change, we have a contest of ambition and risk:
- improvement versus priority;
- innovation versus accounting; and
- invention versus management.

VII. Invention versus Management

Usually, we focus on improvement with the assumption that priority is not in debate.

To win the other contests, we proactively identify and influence the contestant activities: invention and management, or likewise innovation and accounting.

As solution designers, our task is to select the activities and then orchestrate their relationship to each other. We also want our design to be open to ongoing verification and validation. Therefore, from a perspective of change-control, the selections should be modeled, and the orchestrations should be monitored.

However, before any specific discipline or school of pratice is imposed on the design, consider "fundamentals" that are common across all specialties.

For example: we should identify the two different activities by their "essential" and distinguishing natures.
- the essence of the Invention effort is in design, development and deployment.
- Management's essential task targets are control, maturation and change.

Meanwhile, the key influences on invention and management are knowledge efforts -- Search and Research.
- Search: discover, define and classify.
- Research: assess and adopt.

The following table lays out those fundamentals, illustrating a responsibility or opportunity for improvement as approachable through invention and/or management.

Here, Search and Research tasks drive coverage of concerns that are characteristic in both Invention and Management approaches, producing four distinctive quadrants of interactions to coordinate. Parenthetically, the diagonals crossing the quadrants suggest "layers" of re-engineering that exist between Assessments (which often propose needs) and Control (which satisfies needs). But across the horizontal rows, we see that Search is instrumentally linked to modeling, while Research is likewise linked to monitoring.

Without this picture, we might have assumed the reverse -- i.e., that search is about monitoring, and research about modeling. But here we can see why that is not the case. Search must be about the nature of the thing being sought, otherwise we find the wrong thing; we need an identity of what to look for. Research must be about the importance of finding that thing, otherwise there is no value from knowing about it; we need a reason to look for something. Models express identity; monitors express reasons. As knowledge instruments, they expand our awareness of identities and reasons, thus enabling change, thus enabling improvement.

VIII. Innovation versus Accounting

As solution designers we also attend to identifying and influencing implementations, allocations and regulations. A different set of concerns applies here, but modeling and monitoring are terms that link this second group to the above.

Now, the view is on innovation and accounting, which like invention and management might be adversarial but can be complementary if their co-operation is understood. (Here, "accounting" means an investigation that establishes accountability.)

Again we start our considerations with fundamentals rather than with any branded discipline or practice.

First there are basic identities to establish:
- The essential nature of innovation is to remodel something within a given context. (Innovation naturally exploits the modeling in search, if search is provided.)
- Accounting, meanwhile, essentially aims to confirm compliance with a set of permissions or priorities. (Accounting naturally exploits the monitoring in research.)

Meanwhile: the key influences on innovation and accounting are demand contexts -- Needs and Requirements.
- Needs: responses make selections from choices, per an objective
- Requirements: responses incorporate selections per an operation

This following table illustrates the overlay of those issues.

In this picture, we see improvement described as a matter of decision-making about responsiveness. Overall, it shows four different things that can be changed in order to respond to a demand.

More specifically, Responsiveness is being exercised from two perspectives: innovation, in which new kinds of responses are conceived or proposed; and accounting, in which validation is applied to determine whether responses are appropriately directed. Across the horizontal row for Needs, we see strategy represented. And across the Requirements row, we see planning.
- With the responsibility for synchronizing expectations and tolerances, strategy addresses control.
- With the responsibility for reconciling the application of new responses with the forms in which they can be produced, planning addresses effectiveness.

In bringing that to light, this picture is another interesting reversal of typical presumptions: strategy is usually associated with a targeted effectiveness, while planning is associated with control. But here the point is that strategy sets the boundaries around the influence of potential responses, in order to direct them to a goal; meanwhile, planning organizes available resources and commitments to optimally format and support opportunities to respond.

IX. Improvement vs. Priority

The four pictures above expose major touchpoints at which management interventions will alter the position and execution of the current state towards the target state, and thus will moderate improvement.

For example: paradigms and policies, classifications and deployments, or functions and allocations -- all offer different locations and depths at which to intervene, while also soliciting the involvement of readily identified roles or members of the organization.

It's likely that all of these various items are already underway in the organization for one reason or another. The above illustrations provide an argument for how they would logically influence each other to engineer "improvement".

We said the ideal improvement frames the problem like this:
Do we have an advantage? (leverage)
Does the advantage make us competitive? (effectiveness)
Is the competitiveness sustainable? (control)

From the argument of the pictures above, planning turns out to address effectiveness, and strategy addresses control. But what about leverage? How do we identify initial advantage?

When we ask the question, "do we have an advantage?" here's what we are really asking:

"Do we have a characteristic ...
that we can dramatically exploit, in order to ...
change circumstances such that, ...
for what we want to gain, ...
our resulting beneficial options greatly outweigh our inhibitors?

Implementation, allocation and regulation together turn functions, resources and costs into a particular business operation. This is a matter of how those parts are aligned.

Production within that alignment provides the actual responsiveness to demand. The potential responsiveness is what we identify as competency, and in that light, we recognize the alignment as the basis of competency. The impact of the responsiveness changes circumstances in a way that is appropriate to the demand. Meanwhile, the alignment can host more than one kind of response, and any given response may be hosted more or less well. This means that there are multiple competencies to consider.

Planning aims at leverage by selecting and fortifying a potential competency, protecting it with strategy, and using it to allow the organization a highly convenient position with respect to demand.

To create leverage, that selected competency must, like a fulcrum, also allow actual responsiveness under demand to multiply the influence of the organization's position. This influence is measured in terms of the beneficial options -- or in other words, opportunity -- created by execution from the position.

The simplest way to envision this magnification of effectiveness is to imagine that more demand is being satisfied through the execution.

But to get to that effectiveness, the savvy organization targets "improvement" efforts for locations showing increases of important demand that it can satisfy more readily than can competitors.

The key to performance in this will be deliveries to those locations. But the underlying critical success factor is the working definition of demand. According to how demand is defined, the locations will change. Innovation reconceives the demand -- thus proposing not only the locations but also a new target relationship of competency and priority.

Posted by Malcolm Ryder at January 10, 2006 5:02 PM

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