Tag Archives: Strategy

The Input-Output Continuum of Innovation Metrics

Much has been said about the need to measure innovation and how companies must have input and output measures for their innovation programmes. Yet, only about a third of Fortune 1000 companies have any formal metrics for innovation. As more and more companies institute innovation programmes and focus on making innovation an integral part of their strategy, the appearance of innovation related metrics on corporate dashboards is increasing.

Output metrics, aka impact metrics, have always been an important part of measuring business outcomes from innovation. But input metrics, including activity/ process metrics or organisational capability metrics, have also gained significant currency. Now, a third bucket, called leadership metrics, is on the rise. Whereas output metrics speak to the commercial outcomes for a company, and input metrics drive investment, resources, processes and behaviours, leadership metrics indicate the intensity of executive learning and focus on innovation programmes in the organisation.

Companies have used a mix of all three types to drive their innovation agenda. But what is the right mix? Can it be a common mix for all corporations? Should there be an equal proportion between the three types?

Peter Drucker famously pronounced, “What gets measured gets managed.” To address the above then, the right question to ask is, “What do you want to manage?” At the end of the day, the aim is to make innovation systematic and sustainable.

Defining the innovation intent (not unlike strategic intent) of a company is a good starting point. Does your company want to increase revenue from innovation in the short-term? Focus on the input measures related to incremental innovation and output measures for revenue from new products. Does your organisation want to be seen as a thought leader in an emerging space? Drive input metrics related to experimentation and knowledge management, output metrics related to creation of intellectual property, and leadership metrics related to executive sponsorship of incubators. Does the corporation want to transform its culture? Build input metrics into individual performance contracts and maintain a wide-ranging dashboard of leadership and output metrics.

The balance between the three types of metrics has to be an evolving one. Even within each type, the metrics that are relevant to a particular situation may not be so in others. 3M applied the Six Sigma model to its creative process and were none the better for it.

The balance must shift as an organisation matures in its integration of innovation into its strategy, structures, processes and systems. As an organisation grows and matures in its innovation capability, so must the balance between metrics. It is important to frame the priorities between different types of metrics based on the maturity of innovation capability in an organisation.

In the early days of the innovation journey, when a handful of innovation programmes are identified with some budget allocated to such programmes, the highest priority for an organisation is to activate the right resources and incentivise the right behaviours for innovation. Do bear in mind that input metrics introduced in a phased manner are likely to find greater acceptance than an all-at-once approach. This is also a time for leading innovation from the top. Hence, leadership must be seen as driving programmes intently. While incremental innovation is possible in short cycles, breakthrough and radical innovation can be tracked only in the medium-long term, over 3-5 years. Thus, the metrics portfolio should be skewed largely towards input metrics with a moderate dose of leadership metrics to highlight the extent of executive sponsorship or support. So as not to lose sight of strategic business outcomes, it should include a few output metrics too.

Once the innovation-related activities have gathered some momentum, where innovation has been woven into key strategic initiatives and funds clearly earmarked for innovation programmes, the focus of senior executives becomes more critical to sustain and institutionalise innovation in the organisation. Input metrics remain important, particularly with respect to training people on innovation skills and deploying them appropriately for enhancing output. Output metrics could start taking on a bigger role on the dashboard of innovation metrics. Thus, the metrics portfolio should have a healthy balance between leadership and input metrics and a smaller but significant presence of output metrics.

As the innovation machine in the organisation becomes well oiled such that all employees are accountable for innovation, and the funding for innovation programmes is seamless with the budgeting process, the benefits of building a culture that values innovation truly start accruing. Since the innovation agenda is also the strategic agenda and innovation outcomes the strategic outcomes, output metrics take centre stage. The role of leadership could now transform from sponsorship to new business development due to the opportunities for radical and white space innovation. Input metrics would require reduced focus because alignment of resources is embedded in the performance management system and the code of conduct by this time. Hence, the metrics portfolio should be skewed towards output metrics, with renewed leadership metrics and a token presence of input metrics.

The key to the usefulness of any measurement scheme is the inherent success of the activity being measured. Thus, it is critical to capture the aspect that matters most to the innovation philosophy of your organisation.

 

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Old Economy, New Businesses: #RuralWork in India

Judging by the comments and enthusiasm that my post on #RuralLiving drew, it seems to me that the idea of living in India’s villages is romantic enough for many people. Therein lies the irony – it is romantic, but is it achievable? After all, one can’t subsist on clean air and water (seeing as India is not turning socialist anytime soon). However, therein also lies the opportunity. Let me elaborate.

 

On the one hand, it may be true that today every other graduate of the hallowed IITs/ IIMs/ Ivy League or such other institutions is not a jobseeker but a (wannabe) job-creator and going down the entrepreneurship route. On the other hand, one in five 30-something yuppies, wants to turn farmer in the second innings of her/his career.

 

Not too long ago, becoming a farmer was the final resort for the lowest of the low offspring of a farmer and even (s)he would have considered at least one other avenue before signing up for it. The lure of city-life, with its bright lights, shopping options, a service culture (unheard of in the villages), and above all, a much higher income, was something every child who was born towards the end of the Cold War period yearned for.

 

And yet, for the same reasons that #RuralLiving is a massive innovation opportunity, it is also a tremendous business opportunity. It is possible to make money in our villages too, and not simply through the so-called (real estate) “development” projects (perhaps the last thing rural India needs at the moment, but that discussion could be the subject of another post). Expectedly, the two key sectors to focus on are agriculture and services.

 

India continues to be known as an agrarian economy but agriculture is rapidly losing its place as rampant labour-drain from villages forces people to look to other sources of livelihood. After all, how can you till the soil if there’s nobody to till it? Yet, if ever there was a time for agriculture to own its moment in the sun, it is now, what with question of food security looming over our heads in the near future. Of course, the challenges for agriculture in India have changed and so the strategy and methods for agriculture must change too. It needs to be accorded the same level of importance as any other science.

 

What agriculture in India misses is more than simply labour – it lacks a sound systematic knowledge base, appropriate technologies, a focus on scalability, a focus on financials, models to rationalise producer-to-consumer hops, and models to allow non-farmers to participate in the process, to name just a few challenges. But these gaps are precisely where new businesses can flower. Hosachiguru is one such catalyst in the agriculture paradigm that is now being defined.

 

Scalability or the lack of it has been pointed out too often as the chief culprit in the non-story that Indian agriculture has become. But one look at Desai Fruits & Vegetables will tell you how focus, perseverance and horticultural technology can work wonders and still leave the space open for several more F&V kings. Encouragingly, corporates like Mahindra have taken the leap in the dairy sector. But with agriculture being so vast, there are many such opportunities not just in horticulture and dairy, but also in floriculture, pisciculture, cattle rearing, etc.

 

Let’s look at the services sector then. Most people seem to believe either that people in rural areas don’t need services or that a service provider will not thrive there. But, consider this. Over half of the upper income households in India live in rural areas. A higher proportion of rural households are D-I-N-K than urban households. The demand-pull for automobile ownership (passenger vehicles) is expected to be equal for rural and urban areas in this decade. Rural incomes and rural discretionary spending have been rising at a faster clip than urban incomes and similar urban spending.

 

Yet, the rural population is forced to take this discretionary surplus to the cities because there simply aren’t enough avenues, not even essential services, in the rural areas to spend on. A vehicle owner in a rural area must travel at least 50 km, to the nearest service workshop, to get his/ her car serviced or repaired. She must visit the next city to get a salon treatment. He must plan his next city trip such that he can make a visit to the laundry to drop off his ‘dry-clean only’ wardrobe items. She must do justice to her aggregated shopping list for clothes, shoes and beauty essentials when she visits the sole cinema theatre in the city to catch the latest Bollywood release, which will run only for a week at the theatre. Even routine maintenance and repair activities requiring the skills of a plumber, electrician or carpenter require dialing into a city directory for summoning required help.

 

These simple enough routine activities for an urbanite require significant planning, long-distance commuting and an enormous amount of time for the upper income ruralite. Admittedly, it would take an innovative business model, novel channel marketing tactics, and a long-term horizon to make services economically sustainable in the rural areas. But surely the reward should be worth the risk once a solution to the aggregation and scalability challenges is achieved.

 

More power to our villages!

The Four Legs of a Holistic Model for Corporate Innovation

From being considered a downright accusation, to connoting invention, the term ‘innovation’ gained currency in its contemporary form, thanks to Joseph Schumpeter, in the 1940s.

For the corporate world, it has since meant a luxury, a tool for growth, a tool for differentiation, and more recently, the only way to lead and stay relevant in the market. In this context, the animal called innovation architecture requires four legs. In my work, I often deal with one or more of them and the questions they pose.

 

  1. The Agenda

The Innovation Agenda of a firm is closely connected to its brand position. What does the firm stand for? Why has the firm chosen this path? How is it different from any other firm out there?

 

  1. The Strategic Vision

The strategic vision includes the sketch of what innovation should achieve for the firm. What are the main goals of the business – for the long, medium and short term? What type(s) of innovation will the firm focus on – product, process, business model, delivery? Where could innovation draw inspiration from – technology, customers, partners, internal synergies? How will innovation be measured and monitored – metrics that take into account new products, new markets, productivity gains, financial gains, and intellectual property?

 

  1. The Process

The innovation process is the engine that keeps the focus on outcomes detailed in the vision. What is the method for ideation and funnelling of ideas? What are the rules for team-formation, collaboration, resource authorisation and crisis management? What is the planning and measuring mechanism for prototyping and in-market launches? What is the mechanism for risk management? What is the mechanism for ensuring sustainability of the new introduction?

 

  1. The Enablers

These are the behind-the-scenes workers, often termed the ‘input factors’ for innovation. What are the knowledge management systems and learning tools for the enabling innovation? What is the common language used for innovation within the organisation?What are the elements of organisational culture that are conducive to innovation; how are these being inculcated and multiplied? What are the organisation structures and governance mechanisms that allow innovation to germinate, proliferate, and become self-sustaining? What are the reward mechanisms for those who contribute to the innovation economy of the organisation?

 

For most companies, building this architecture is a serendipitous journey. And with each successful journey is born a successful model of innovation.

Six reasons why #Uber could fail in India

The rise of the new economy has given rise not just to new industries but also to new business models. E-commerce led the wave of what has today become the positioning of choice for many an entrepreneur – the ‘integrator’. With technology playing a substantial role in ‘integrating’ various pieces of the model, several challenges got addressed. The same technology in turn, however, laid out a fresh set of issues that need to be resolved.

For Uber, these challenges centre around seemingly infrastructural but essentially human factors. It has overcome the ignominy that (an) errant driver(s) caused in its early days in India, but its problems are far from over. Here are six reasons why #Uber could fail in India:

Reason 1: Technology issue – Hi-speed Internet, the keystone of Uber’s business model, is not yet the norm even in metros in India.

Reason 2: Trust issue – Drivers don’t trust the navigation feature on their Uber devices, and so, bother customers endlessly for directions, making pick-ups a nuisance.

Reason 3: Agency issue – Drivers, at will, turn off their device, misleading customers as to their actual location. Worse, they can refuse calls and become incommunicado because calls to and from customers are routed through Uber.

Reason 4: Temporal issue – Drivers don’t respect the time estimate for arrival provided to customers. Hence, 5 minutes become 15, 10 become 25. Detours are rampant, sometimes for a snack break, at other times for a brief nap.

Reason 5: Cultural issue – We Indians have an oral culture. We don’t like to talk to an email ID (support@), especially one that doesn’t respond. As a customer, your only recourse to grievance redressal is to force-fit your complaint into the standard set of issues listed on Uber’s website, after which you will promptly receive a stock email from Uber in, no doubt, a personalised tone.

Reason 6: Holier-Than-Thou issue – Uber charges customers for rides cancelled by drivers, at will. That too without any notice. A case of taking the customer for granted, methinks.

A fancy name and a fancy app don’t a business model make; respect the customers – recognise their uniqueness – and their business is yours to take.