On having a “fostering innovation” culture

As I have repeatedly written on this blog, continuous innovation requires access to knowledge. So an organizational culture conducive to knowledge sharing will foster innovation as a direct result. James Todhunter (CIO of Invention Machine Corp.) wrote an article just published in CIO.com titled: “Fostering innovation culture in an unpredictable economy”.

I am not sure what he meant by “unpredictable economy” as no economy has ever been predictable. “Knowledge economy” would be more relevant (and maybe what James had in mind) to relate to the current economy where knowledge (intellectual capital) is increasingly the most valuable asset for businesses, so the intangible taking over the tangible. 

 However, James Todhunter’s view that an innovative culture must be initiated and supported from the top of the organization is spot on: <<[..] It starts at the top. The most common reason cited for why innovation workers feel their organizations fail to have an innovation culture is a perceived lack of management commitment. Organizational culture is created from the top down. In order to create a culture that supports repeatable innovation success, management has to make its commitment to innovation clear and unambiguous. [..] It starts at the top. It really is that simple. Management has the power to set the tone and drive the culture. Managers who avoid taking responsibility for driving the innovation culture by using the “adoption must be a grass-roots thing” crutch, will always be met with failure and left wondering why they can’t achieve their repeatable innovation goals. Culture begins and ends at the top. To create a value-driving, sustainable innovation culture, you need only make it so.>> 

I have constantly in this blog supported the idea that a sustainable fostering innovation culture (or knowledge sharing culture) can only be built with a honest top-down approach. In other words, it needs to be a strategic initiative. I know that many supporters of the social Enterprise 2.0 gaining momentum see it as an alternative to the top-down approach. They believe that if a large part of the people at the base of the organization start collaborating and sharing knowledge and adopting new (cheap or free) tools to do so, and if they increase productivity as a result; it will force the whole organization and its management to embrace these methods of working, this in turn forcing a culture change. 

Of course, people at the fringe of organizations will find benefits in adopting new collaborative technologies at a personal level first then within their team or department, as long as these technologies are answers to needs identified by them to do their work more efficiently and/or effectively. However, for these adoptions to force a company-wide culture change by themselves is not at all a given outcome. This might happen in some contexts but probably only in organizations where the current culture only needed a spark to turn into a knowledge sharing culture. In the majority of organizations where the culture is predominantly of a command and control type, matching my list of 20 syndromes I challenge the bottom-up approach to succeed on its own! Anyone aware of such a successful cultural change, please speak up. 

What has happened in numerous occasions and will continue to happen, is for organizational cultures to be transformed with the impulse and leadership from the top (Buckman Labs, IBM and BP are only 3 of the most famous ex. of such cultural transformation). If we consider Google, surely one of the most innovative companies these past few years, its ground-breaking open culture was initiated by its founders, so therefore a top-down leadership. 

Enterprise 2.0 will not drastically change the balance of power and responsibility: Especially since the Enron scandal! The boss remains the boss and if he/she wants employees to stick to their job descriptions and wants remuneration and recognition processes to reflect this fact, no clever technology will fundamentally change this and Enterprise 2.0 initiatives will remain localized and accessory to standard business processes. Now, is wanting to change the culture sufficient for a leader to succeed in this endeavour? Probably not. No matter how good a leader you are, you cannot simply tell people to start sharing knowledge and be innovative for everyone to do so overnight!

James Todhunter gives a list of 6 methods for effectively fostering an innovation culture: 

 · Invest in your people. 

· Reward the behaviour you want. 

· Invest in infrastructure to support sustainable innovation. 

· An important part of the innovation infrastructure is the framework to leverage knowledge – both the knowledge within your organization and that which is external to the enterprise. 

· Promote the value of innovation. 

· Practice innovation in everything. 

This is a good list and with a very good chance of success if followed. I would however like to add one method that should actually be the one to start with: Lead by example! Don’t count on people to do what you say, even if you reward them for it. It will surely be more effective if you start by doing it yourself: be open, share you knowledge, show off your own creative or innovative ideas (and you might then realize that special rewards are not as necessary as expected).

Knowledge Management in IT Service Management

ITIL (IT Infrastructure Library) v2, the now internationally recognized framework for IT Service Management, was published in 2000 and at the time only implied knowledge management in IT service delivery. Obviously, managers involved in implementing ITIL based services (like myself btw 2003 and 2007) would consider and attempt to cater for the required knowledge capture/retrieval/sharing/reuse. Here is a very good article written in 2003 about such a Manager (Michael McGaughey, Service Management Framework Architect at TXU, the leading energy retailer in Texas) who was concerned with incorporating KM in the IT service framework he was designing. I will reproduce here only these 2 key sections: << [..] knowledge management goes back as far as human memory. It evolved onto stone tablets, books, file cabinets and sticky notes. But knowledge management in the IT world has always suffered from a lack of context, a lack of a problem that KM is clearly designed to fix. Service management may be the answer. IT service management demands a customer-centric view of IT. It helps the company's IT department achieve three fundamental goals: Achieve customer satisfaction, exceed customer expectations and manage customer perceptions. "The service management framework lives and and breathes with knowledge," said Michael McGaughey, Service Management Framework Architect at TXU, the leading energy retailer in Texas, which serves five million customers in North America and Australia. "There's a lot of knowledge used across the process silos." >> And: << Knowledge management as an IT concept has a lot to gain from working within an IT service management framework. One of the factors that led to the development of its identity crisis is that knowledge management offers very little in the way of a value proposition by itself. The value it offers is in making other processes better. >> I really like this last paragraph. It has indeed been KM’s main issue in particular with organizations top-management, even though I would say that today with the help of Enterprise 2.0 technologies, KM can deliver value by itself. Last year, ITIL v3 was published and I was very pleased to find out that in this edition, KM was formally taken care of as a Service Transition concept. I was even more pleased to see that it also included cultural change management! So now, IT departments are expected to formally assess and deal with the cultural change that a new service management implementation can initiate or even require! This was long overdue I would say.

"The Google Enigma"

I found a very good article with the same title as this post by Nicholas G. Carr on Strategy-business.com (thanks to a post by Bertand Duperrin). Nicholas warns of the hype around Google’s model to foster innovation and the belief that it is the direct reason of its amazing success. But it could very well be more the product of its success instead of the cause as Nicholas writes. Nicholas message is not to ignore Google’s example but to be careful not to assume that the Google way is necessarily the one to follow for all businesses and in all contexts. I would like here to highlight the following two passages, both found in Nicholas’ conclusion. The first one gives the two key examples of Google strategic initiatives that businesses should reflect on seriously and use as benchmarks: “Google’s use of powerful computers to collect and make sense of the operational and customer data flowing through the Internet and other networks provides a window into the future of many industries. And, on a related note, the company has created simple but useful systems for sharing information within and between teams, a challenge that has frustrated many firms.” So, in other words, this is about knowing better your customers to serve them better and about effective and efficient internal knowledge sharing to leverage your human capital (what I’ve been writing about since my first post on this blog!). The second passage is what, according to Nicholas Carr, Google does teach us: “Above all, Google teaches us, through both its successes and its failures, that smart companies — the ones that are not only consistently innovative but consistently profitable — exhibit three qualities. They hire talented people and give them room to excel. They measure progress and results rigorously and make course adjustments quickly. And they remain disciplined in their work and their spending, curbing the instinct to do too much at once.” I don’t think that this is this is the only lesson on strategy we can retain from Google’ success, but I agree with Carr that it all relies first on hiring talented people and then making sure to continuously leverage this human capital.

What should Web 2.0 mean for Luxury Brands ecommerce strategies?

[NOTE: I had written this article back in 2006 but could not publish it then. I can now do so and it is still very much relevant 16 months later!] 

It is bizarre how an acronym so widely used as “Web 2.0” can lack an unanimous definition. What most experts tend to agree on however is that Web 2.0 is made up of at least two key concepts (as noted by the journalist Phil Muncaster in ITWeek 02/Oct/06 issue- http://www.itweek.co.uk/ ): “Improved user experience and collaboration. The democratisation of information.” The latter concept refers to the fact that information becomes ubiquitous and relatively easily and cheaply accessible by potentially anyone.

Democratisation also implies virtually no control over this “open” information. Companies cannot control what is said about them and about their products. They cannot even hope to read all this information relevant to them due to the shear amount involved. The former concept is I believe even more specific to the Web 2.0. It relates to the fact that the web users are increasingly expecting a positive and memorable experience while visiting a site. By “experience” is meant: as user-friendly as possible, as interactive as possible and as unique as possible. In the case of ecommerce sites, this will be on top of the Web 1.0 criteria such as reliability, overall performance, competitive product prices and efficient and effective integration with back-end delivery and CRM systems. As Phil Muncaster concludes in his article: “So whether you believe all the hype or not, Web 2.0 is changing the way users behave, retailers react and enterprises interact with their staff and business partners. Those who fail to embrace it will probably be left out”. 

So then what does this new environment entails for the luxury products companies launching ecommerce initiatives? 

As for all other companies, it means both an opportunity and a challenge. An opportunity since the Web 2.0 should enable companies to better satisfy their customers by being more in tune with what they expect and desire. A challenge because of the relative difficulty to get it right first time using emerging Web 2.0 technologies (such as Ajax, Mashup) and because of the growing concerns for the Web security and privacy issues. 

I would however infer that the luxury market companies are particularly well positioned to seize the opportunity and take on the challenge. The reason is that these companies are already by nature in the business of providing customer-centred, differentiating, memorable, even unique experiences to their customers. I believe you can make a parallel between: 

· The individualized experience expected when we enter a Cartier, Louis Vuitton or Gucci boutique compared with the standardized experience expected in a Tesco or Wal-Mart superstore; and 

· our expected experience on the Web 2.0 compared with the original Web 1.0. 

Ecommerce customers of luxury companies will expect and value a Web experience as differentiating as purchasing in their high street shops. Therefore, these companies’ ecommerce websites must be highly innovative and take full advantage of the Web 2.0 context. This is totally in line with the following statement I made in my earlier post “Customers increasingly demand more personalized products and services” in Dec/05 : “This new competitive environment indicates that luxury Brands should focus on bridging the gap between them and their customers through co-creation of value with the customers”. 

The basic principle is to build this personalized experience through collaboration with the customers, which happens to be the other Web 2.0 key characteristic! 

Luxury goods companies need to first realize that they must and can be as exclusive on the Web as on the high street. They then need to engage in a sincere and continuous collaborative process with their customers to not only deliver what they seek, but to surpass their expectation.

A great little KM story

Found on CIO.com this great little knowledge sharing story in a context where it was least expected (among retail sales staff used to compete with one another): "Around the holidays in 2000, a Giant Eagle deli manager hit on a way to display the seafood delicacy that proved irresistible to harried shoppers, accounting for an extra $200 in one-week sales. But uncertain of his strategy, he first posted the idea on the KnowAsis portal. Other deli managers ribbed him a bit, but one tried the idea in his store and saw a similar boost in sales. The total payoff to the company, for this one tiny chunk of information, was about $20,000 in increased sales in the two stores. The company estimates that if it had implemented the display idea across all its stores during this period, the payoff might have been $350,000. Previously, "there was no tradition of sharing ideas in the store environment," says Jack Flanagan, executive vice president of Giant Eagle business systems. Seeing the bottom-line benefits of sharing knowledge propelled the employees over their initial misgivings, spurring them to try and out-hustle each other on having the best suggestions, rather than the usual metrics. "Now they're competing in the marketplace of ideas," says Russ Ross, senior vice president of IS and CIO at Giant Eagle. "It became a 'Look What I Did' showcase. Everyone wanted to put something in there," says Brian Ferrier, store director of Giant Eagle's South Euclid, Ohio, supermarket. " This is a typical example of a user-initiated quick win that made a whole KM solution become effective. It does seem so simple and common-sense, doesn't it? But why such simple and common-sense concept be so hard at implementing? "

“Forming an ‘inside-out’ company is the secret to innovation in business”

On the PA Consulting website, I found this very interesting news article dated April 2007. It is about a research by Dr Carsten Sørensen of the London School of Economics (LSE) and PA Consulting Group (PA). This is the part I must highlight: “[..] The research found that IT is the enabler for innovation across the whole business. What we are starting to see is the forming of the ‘inside-out’ company, where interactions and relationships with stakeholders actually shape strategy rather than are subject to it. The research concludes that we are approaching a tipping point, where technology will be cheap enough and intuitive enough to make collaboration as valuable a source of innovation to the business as computation has been a source of efficiency. Technology is changing the way we interact and customers (business and consumer) are demanding a richness of dialogue. [..]” First, I am pleased to see that this confirms what I wrote on the knowledge-driven organization back in 2005, and more recently in Jan 2007. Then this article does correctly make the link between the need for a change in the organizational culture and the introduction of new technologies facilitating collaboration. It is implied that you need both in order to foster value-generating innovation throughout the organization. I spotted the following culture-related change in the article: * Organisations that see their customers and their staff as sources of untapped potential and ideas * unlocking this pool of innovative talent will require collaborative management and not traditional command-and-control-style management * interactions and relationships with stakeholders actually shape strategy rather than are subject to it * senior executives are taking a more facilitative than directorial role, acting as a catalyst or ‘lightning conductor’ for innovation wherever it may evolve * this new outlook on innovation and technology has changed traditional management models towards a new ‘collaborate and control’ model * You do not have direct command-and-control anymore. You are working far more across virtual teams. Teams that are brought together just for specific projects. * The trend towards networks and away from hierarchies and the user empowerment that this entails is changing the way we interact. Executives are seeing a similar phenomenon in business, with users across the organisation demanding that businesses are more reactive to their needs and being willing to take responsibility for improving their working environment. * In order to identify the strategic value of IT it is necessary to employ the technology in developing relationships, listening to customers, and engaging them actively in the production of innovative services Good stuff! The culture change described here is the kind that would do away with the cultural barriers to knowledge sharing I have been repeatedly writing about (mainly here, here, here and here). A few more high-profile articles like this one and I might be able to rest my case...

Great synthesis of KMers' current thinking

On 22nd Jan, I informed you of Colleen Carmean's PhD work on new practices in design and support of shared knowledge environments, and that I was proud and delighted to be in the shortlist of KM specialists asked to participate in her research. 

Well, Colleen has now completed the synthesis of all the participants inputs and has now posted it in a wiki for all to see. Read it! It's truly a great summary of the current thinking of KM specialists on the following 6 key concerns: 

 1. INHERENT CHARACTERISTICS of effective emergent learning environments 

2. Fostering INDEPENDENT, AS-NEEDED KNOWLEDGE ACQUISITION 

3. Fostering SHARING, COLLABORATION and NETWORKING of organizational knowledge 

4. Fostering better expression and sharing of TACIT KNOWLEDGE 

5. Potential TOOLS or PRACTICES for finding, creating and encouraging organizational knowledge 

6. GREATEST PRIORITY in creating a more effective digital workplace I must agree with it all as I was given a chance to revise it before publication. 

 You can post comments here as Colleen reads my blog or here is her site.