No, it’s not, although the two are often confused. Good new ideas are everywhere around us, but turning even a few of those ideas into viable, scalable products and services is something much more difficult.
Understanding the difference between creativity and innovation can shed light on seemingly contradictory ideas, namely, that User-Led Innovation Can’t Create Breakthroughs and an article by Patricia Cohen in the New York Times last week about inventions created by users: Innovation Far Removed From the Lab
Inventions from the trash can
Patricia Cohen tells the touching story of Daniel Reetz who built a scanner that was fast enough to scan a 400-page book in about 20 minutes out of stuff that he found in trash cans: two cameras and two lights that he tied together with pieces of acrylic and wood. Total cost: about $300 i.e. a fraction of the $10,000 commercial book scanners that are on the market. Reetz put a how-to guide on a Web site. Since the guide went up nearly two years ago, she reports that about 50 people have built their own scanners from castoff furniture, aircraft aluminum, whiskey boxes and plastic foam. Ms Cohen goes on to give other examples of inventions by users.
So what? Ms Cohen concludes: the tinkering of do-it-yourselfers “is challenging a deeply entrenched tenet of economic theory: that producers, not consumers, are the ones who innovate.”
In fact, she is talking about creativity, rather than innovation. It’s one thing for fifty people to learn from a website how to make scanners out of stuff they find in trash cans. It’s quite something else to take that idea and turn it into a viable commercial product. Significantly, according to Ms Cohen, Daniel Reetz is not marketing and selling his scanner: he has taken a job doing something else at Disney Research labs.
Creativity vs Innovation at Nokia
Large organizations these days are teeming with new ideas. Management is often staring at market-winning ideas and systematically rejecting them.
Take the sad story of Nokia [NOK]. In 2004, researchers at Nokia, the world’s leading mobile phone company, presented a prototype of a new kind of mobile phone to the senior management. The phone, which connected to the Internet, had a large bright screen and was operated by fingers on a touch-screen. The researchers believed that the device would be a winner in the fast-growing Smartphone market. Senior management evaluated the proposal and decided that the risks of failure did not warrant the costs: Nokia did not pursue development of the phone.
In 2007, Apple [AAPL] introduced the iPhone with precisely the features that Nokia’s management had opted not to pursue.
By 2010, Nokia’s market share in Smartphones was devastated. In the United States, its share of the Smartphone market has slipped from 35 percent in March 2002 to 8 percent in April 2010. Since 2007, Nokia shares have lost almost half their value.
Not surprisingly, Nokia’s CEO has been replaced and large scale downsizing is taking place—yet another victim of disruptive innovation.
“Good” management kills innovation
The most frightening thing about disruptive innovation—the phenomenon documented in Clayton Christensen's The Innovator's Dilemma (HBSP, 1997) in which market-leading companies in industry after industry have missed game-changing transformations—is that the mistakes are not the result of "bad" management. Instead, as Alan Murray has noted in the Wall Street Journal, the disasters have occurred because managers were following the dictates of "good" management. They studied their customers. They carefully researched the market and new technologies. They meticulously cultivated innovation. They stringently evaluated new development and weighed the cost of new investment against potential gains. And in the process, they missed disruptive innovations that opened up new customers and markets for alternative blockbuster products.
The accelerating death rate
Deloitte’s Shift Index has quantified the accelerating death rate. Management in the US private sector is in sharp decline. The return on the assets of U.S. firms is only a quarter of what it was in 1965. The life expectancy of firms in the Fortune 500 is already startlingly brief—now less than fifteen years and heading towards five years, unless something changes. Executive turnover is accelerating.
How can CEOs enable their firms to evolve beyond “good” traditional management and make them as adept at handling disruptive innovation as they have been at implementing disciplined execution? How can innovation become an organization-wide capability, a part of the firm’s DNA?
How does innovation happen?
The issue is not as difficult as it looks, once we step outside the mental blinders of traditional management and hierarchical bureaucracy. It means recognizing that we are living through an epochal shift in the balance of power in the marketplace from seller to buyer. With that shift comes an inexorable shift in organizational dynamics from an inside-out perspective (“You take what we make” so that we can make money for the shareholders) to an outside-in perspective, so as to focus the entire organization on delighting the client through continuous innovation ("We try to understand the problems, hopes and dreams of the customers and find ways to solve those problems and fulfil those hopes and dreams"). It's a shift from shareholder capitalism to customer capitalism.
In fact, it’s now quite easy to find out how to create continuous innovation, in articles such as Gary Hamel’s Moon Shots for Management (February 2009) and Roger Martin’s The Age of Customer Capitalism (January 2010) and in books like The New Capitalist Manifesto by Umair Haque, The Power of Pull by John Hagel, John Seely Brown and Lang Davison, Reorganize for Resilience by Ranjay Gulati, Leadership in a Wiki World by Rod Collins or The Responsible Business by Carol Sanford.
A comprehensive review of the principles and practices involved in delighting clients can be found in my book, The Leader’s Guide to Radical Management: Reinventing the Workplace for the 21st Century (Jossey-Bass, 2010).
So why aren’t all major corporations making the inevitable change towards continuous innovation?
Change or die: Individuals
One explanation is that changing habits is hard, even when the cost of not changing is death:
For instance, a study of heart patients by Dr. Edward Miller, the dean of the medical school and CEO of the hospital at Johns Hopkins University was cited in Fast Company. It showed that the gains from heart surgery are temporary unless patients change their life style: less smoking, drinking, eating, and stress, and more exercise. The option is simple: change or die. Yet very few do. "If you look at people after coronary-artery bypass grafting two years later, 90% of them have not changed their lifestyle," Miller said. "And that's been studied over and over and over again. And so we're missing some link in there. Even though they know they have a very bad disease and they know they should change their lifestyle, for whatever reason, they can't."
In effect, many patients choose death.
Change or die: businesses
Similar issues now face businesses. The statistics of impending organizational death are as grim and inexorable as the statistics the patients who have undergone heart surgery.
And the way to avoid impending death is equally well-known and easily available.
Will senior managers of the Fortune 500 choose life or death?
How many examples like the faill of General Motors, Chrysler, NYSE and Borders will we have to witness before the leaders of the Fortune 500 get the message and do something about it?
The choice is not whether to change. Market forces dictate that the change will happen. The only choice for leaders is whether to watch market forces take their course, destroying one firm after another, or elect to make the inevitable change happen voluntarily, intelligently and elegantly.
The Leader’s Guide to Radical Management: Reinventing the Workplace for the 21st Century (Jossey-Bass, 2010): “This book is destined to be one of the truly great management books." Wayne Hurlbert, Business Blog World