Lack of focus in early stage companies can be deadly as they rarely have the financial or human capital required to pursue a large number opportunities at once. Attempting to tackle multiple markets with multiple product lines at the same time can burn through financial resources and also burn through people in the process.

To improve your company’s effectiveness and chances of success, identify what opportunities are worthy of focus and commit to executing against those. To do this, ask yourself some key questions:

1. Are you making the most out of the products and services you currently offer? The saying “A bird in the hand is worth two in the bush” applies here – you may be better focusing on maximizing the return on existing offerings instead of ploughing resources into developing new ones. 
2. How is the new opportunity better than others I am already pursuing? Is there bigger market potential? Does it align more with what I am passionate about? Will it enhance my current offerings?
3. What are the relative risks? While the potential benefits may be greater, what are the additional risks involved with the new opportunity?
   
   
4. What is the opportunity cost? If I dedicate time and money to pursuing the new opportunity, what are the implications on other opportunities? Can I realistically pursue multiple opportunities or will I need to cut some loose? Which ones? 
5. Do we have the time and money to pursue this opportunity? If not, can I realistically secure the resources necessary to achieve success? 

To give you a practical example, I remember back to my days with Immaculate Baking Company when we were looking at adding the refrigerated dough product line. Some advised us to “focus on selling the products you already offer”. This was reasonable advice, but we asked ourselves the questions above and decided that pursing the dough opportunity made sense because:

• We already had significant distribution with our baked cookies and the incremental cost of expanding distribution further was pretty high.
• The opportunity in refrigerated dough was bigger than in baked cookies and the competition less fierce.
• The risks of not pursuing the dough opportunity (slower growth) were higher than the risks of pursuing it (cost of failure).
• The opportunity cost was relatively low as development resources were not being spent on any other projects.
• We had the time and money to pursue the opportunity and felt comfortable that we could secure more if necessary given the nature of the opportunity.

Are you focused on the right opportunities?

Imagine the products and/or services you offer as a wire stuck through your customer (see picture).  Each element of your offering that is unique and adds incremental value to the customer beyond what your competitors offer becomes a crook in the wire.  The wire that is most crooked is going to be the most painful and difficult one for the customer to remove.  

Here’s the kicker – the more crooks you have in your wire, the less price sensitive your customer will be.

So what are some ideas to add crooks to your wires?

• Innovate in ways that customers value (and to find out what they value you will probably find talking to them is always a good starting point!):
  • Functionality
  • Cost
  • Quality
  • Lead time
• If you offer a product, think about the service elements that surround it:
  • Ordering process – is it as painless as possible?
  • Delivery – how quick can you turn around orders?
  • Customer Service – how friendly and responsive is your sales and service team?
  • Payment – do you offer the terms customers want convenient methods of payment?
• How can you exceed the customer’s expectations?
• What if you asked your staff for their ideas on things that could be added or improved on?
• What is being done in other markets, industries and geographies that you could apply in your business?

When you start thinking beyond what you currently do and thinking from the customer’s perspective, you may be surprised at the ideas you come up with. 

So go make some crooks in your wire!

As an entrepreneur, much of your identity is wrapped up in your business and it can be incredibly hard to separate the two.  When your life has been dedicated to building and running a company, it is understandable for an entrepreneur to go out “with their boots on” but the question is - where does that leave the business?

Real leaders build organizations that eventually no longer need them.  This is not to say they no longer have value to the organization, just that if they got hit by a bus the organization would be in good shape to continue on.

The importance of this really hit home for me recently when the founder of a young organization I work with was suddenly unable to continue to work with the organization.  Thankfully, we had been working for the past year or so to strengthen the team, delegate responsibilities and document many of the organizations’ activities.  Losing his day-to-day involvement has still hit hard, but thanks to the moves we had made to enable the organization to “stand on its own two feet”, we have been able to soldier on.

As an entrepreneur, you may want to sit back and ask yourself:

• What would happen to the organization I have spent years creating if I was hit by a bus?
• Whose shoulders will bear the burden?  My spouse? My business partner? My staff?
• Would they love me or hate me for the state in which my organization was left?

Death is an exit scenario - it is not a strategy.  Uncomfortable as it may be, look at what you do on a daily basis and start to figure out how to manage yourself out of a job.  Who knows, you may even find you enjoy having more time to focus on other things!

I live in Greenville, a small city in Upstate South Carolina.  Like many small cities, Greenville is asking itself, “How do we attract and retain the talent needed to develop economically, culturally and socially?”

Here are a few of my thoughts springing from a focus group discussion on this topic moderated by Greenville Forward.

Perceptions take time to change…
Greenville is physically attractive and positioned well geographically (revitalized downtown, good parks, near the mountains, good climate, close to big cities, etc).  There are plenty of cultural offerings (symphony, performing arts theatres, large indoor arena, ballet, zoo, festivals, etc.) and it has a reasonably diversified economy including a number of big employers (BMW, Michelin, GE, etc.). 

However, unless you have visited Greenville in the last 5 years, you are unlikely to know about all these things and your perception is probably “why would you want to live in a small town like Greenville?”  Your perceptions may even be colored by old “southern” stereotypes or the less-than-favorable press South Carolina has received recently (3 of the top 10 quotes for 2009 were attributed to South Carolinians). 

As with any stereotypes, these can only be changed over the long term. So what can be done in the short term to grow the community of talented young people?

Help organizations sell the city where needed…
Attracting talent that has no pre-existing connection to the city can largely be left to the organizations trying to attract it. Nevertheless, some services can be offered to these organizations to make it easier for them to “sell” the city.  The City of Greenville does a pretty good job on “general stuff” (parks, facilities, entertainment options etc).  However, providing access to information that may help attract talent that has specific interests is also important and does not seem to be done so well (e.g. connecting to specific clubs, associations, non-profits, etc.).  Having all of this information easily accessible in one place online is ideal.

 
Build on what you have…
Rather than attracting new talent, focus should be on addressing the needs of talent that already has a connection to the city:

• Born and raised here and/or have family here
• Went to college here and/or have friends here
• Have/had d a job here and want to stay here

This is the talent that is most likely to stay in or come back to Greenville so it makes sense to build on this existing foundation rather than starting from scratch.  So how do you do this?

 
Prevent “Talent Frustration”…
With talent that does have pre-existing connections to Greenville, the key is ensuring this talent can become (and stay) engaged to its full potential. Any disconnect between their talents and their ability engage those talents results in "talent frustration".  Talent frustration equals lost productivity and the talent may eventually give up and leave town for better opportunities elsewhere. 

How do you prevent “talent frustration”?

1. Engage the talent in organizations and groups that strengthen the community around them and provide them with the types of social interactions they desire. E.g. non-profits, arts organizations, sports, etc.
2. Engage the talent in a fulfilling career.

Engage talent in “extra-curricular” groups…
This is relatively easy as talent is typically looking for ways to get engaged in things they are passionate about. If the city has a networking and leadership development organization for young talent (for example, Greenville has the PULSE group and Leadership Greenville) these groups could build a way for organizations to "post" opportunities for talented young folks to check out, submit applications and get engaged in non-profit committees, boards, associations, etc.

Success does also require a desire on the organizations’ part to welcome that talent with open arms - sometimes this is the hard part…

Engage talent in fulfilling careers…
This is a somewhat more difficult issue to address.  Some of the questions a city should ask itself:

• Do enough career opportunities exist to fulfill the talent that is already here?  If the answer is “No”:
  • What opportunities is the talent looking for? Small companies, big companies, low tech, high tech, specific industries, etc.
  • Do local entrepreneurs have the help they need to start a company, survive and grow?
• Do companies have a struggle finding the specific talent they need here? If the answer is “Yes”:
  • How are they looking for talent?  Are there resources they are not using?
  • How does talent find out about companies that may want/need their talent? 
  • Are there enough industry-specific forums to connect companies with great talent? E.g. Greenville has the GSATC for technology talent which is a good start but what about other industries?

This is just scratching the surface of some of the issues surrounding talent attraction and retention in a small city – what are your thoughts and ideas?

Its a 25,000 square-foot membership-based workshop that provides members with access to tools and equipment, instruction, and a creative and supportive community of likeminded people so you can build the things you have always wanted to make.  

As stated on the website, this facility is, "perfect for inventors, makers, hackers, tinkerers, artists, roboteers, families, entrepreneurs, youth groups, robotic teams, arts and crafts enthusiasts, and anyone else who ever wanted to do something, but couldn’t."

This looks like a fabulous resource and is a model that could be replicated in other cities to help lower the barriers between great ideas and execution.

http://www.facebook.com/video/video.php?v=180016321249

I prepared a written summary of the discussion that can be downloaded at http://www.arenaconsulting.net/downloads/

4 Quadrants of Innovation

http://bhc3.wordpress.com/2009/12/01/the-four-quadrants-of-innovation-disruptive-vs-incremental/ 

In thinking about the types of innovation, there are two axes that measure the level of changes: 
- Managing existing markets vs. creating new markets 
- Leveraging existing technology vs. developing new technology 

When plotted, the two axes create four quadrants of innovation. Each of these has its own dynamics. In the post, I reference different companies for each quadrant: 

1. Existing tech, manage existing market = Wal-Mart 
2. Existing tech, create new market = Twitter 
3. Radical tech, create new market = Amazon Kindle, AT&T 
4. Radical tech, manage existing market = Hulu 

4 Levels of Innovation

http://invitroinnovation.blogspot.com/2009/11/4-levels-of-business-creativity.html

A hierarchy of innovation based on impact on consumers. 

1. Category level Innovation - Where the brand or product has innovated to such a degree that it has created its own unique space e.g Amazon Kindle. 

2. Brand Innovation - Where the offering itself is not that unique, however the branding of it creates something truly special in the eyes of consumers e.g Innocent Drinks from the UK, they sell smoothies with attitude. 

3. Product or Service Innovation - This is the incremental improvement stuff that is the bulk of innovation consumers experience. P&G are masters of this, the consumer electronics guys to too much of this. 

4. Marketing or Marketing Programme Innovation - New ways to engage with the audience - Tourism Queensland's - Best Job in the world campaign is an excellent example of innovating in this area. The Barack Obama Presidential Campaign is another. 

I get the economic theory, it still seems to me that to increase wealth significantly within a community, that community must export more than it imports.

Am I wrong?

So how do you stimulate product and process innovation in your company? 

Over the years, companies have devised countless ways to foster innovation within their organizations.  For simplicity, these can be grouped into five main models:

1. Establish a company-wide culture of innovation
2. Select internal groups to drive non-specific innovation
3. Select internal groups to drive specific innovation
4. Internal / external collaboration (a.k.a. “Open Source” Innovation)
5. Innovation through acquisition

A company may employ one, many, or (in the case of some of the most innovative companies) all of these models simultaneously.  So let’s explore each one along with some real-world examples.

1)    Establish a company-wide culture of innovation
Creating an environment where all employees are seen and treated as entrepreneurs is one approach to innovation.  This approach assumes all employees are potential sources of innovation and are encouraged to come up with new ideas for improving existing products and creating new products (product innovation) and how to better do what they are doing (process innovation).  This model encourages many incremental innovations rather than just a few revolutionary big innovations, but it establishes a culture of change that creates more favorable conditions for innovation execution and improves the likelihood of eventually hitting on a big innovation.

Examples

• W.L. Gore & Accociates – Even if you haven’t heard of the company, you no doubt know one of its major product lines: Gore-Tex. At Gore, there are few ranks and titles and hardly any hierarchy. The company is organized into small teams with each of its manufacturing facilities limited to around 150 people. That's small enough for everyone to know each other and to stimulate cross-functional collaboration.  Teams are rewarded for creating and implementing product and process innovations and end up holding each other accountable – thereby driving innovative thinking throughout the organization.

Issues

• Changing a culture starts from the top – how entrepreneurial is your management team and how willing are they to listen and implement ideas from the very lowest level employees?
• The smaller the number of employees, the more likely you are able to create a culture of innovation.  If your company is big, are you prepared to break it into smaller pieces to drive more innovation?
• Success requires not just the generation, but also the implementation of ideas.  Are innovations in your company more likely to be squashed than implemented?  If so, beware that promising an innovative culture and delivering bureaucratic red-tape actively de-motivates employees and ends up being worse than not trying to change at all.
• How will you balance work on “fun” innovation initiatives with ensuring the day-to-day work gets done?
• How will innovations be financed and resourced?  Do you have/need a process for identifying which ideas should get more resources to enable implementation?
• What are the implications for the hiring and employee review processes?  What happens to candidates and employees who are not entrepreneurial? 
• How do you compensate and reward for innovation?  Individual-based? Team-based?

2)    Select internal groups to drive non-specific innovation
Selecting groups of employees (rather than all employees) to come up with innovative new ideas and execute them within an organization is more common than successfully developing a company-wide culture of innovation.  This approach has been around for decades in the form of R&D departments, but is now employed in many different ways.  For example, it now includes process-focused groups and cross-functional product innovation teams. Such teams bring varying perspectives to bear and enable quicker translation of ideas into reality.  The difference between this model and the creation of groups to drive specific innovation is that this model only loosely defines the area of opportunity to be pursued e.g. “Develop new product ideas” vs “Develop a new mousetrap”.

Examples

• 3M – Technical staff are allowed to spend 15% of their time on projects of their own choosing.  The creation of PostIt notes is the most well-known product innovation developed under this policy. Genesis Grants also give employees funding and resources to pursue an idea.
• Google – Similar to 3M, Google mandates that technical employees can spend 20% of their time on pursuing new ideas that may be totally unrelated to Google’s core internet search business.
• Starbucks – Specially selected cross-functional and cross-hierarchy teams go on “Learning Journeys” and “Inspiration Field Trips” to talk with customers and observe market trends.  They come back and share new product and process ideas.
• Southwest – Organizes collective, cross-functional brainstorming sessions to identify areas of opportunity and develop innovative solutions to address these.
• InfoSys – Specially selected “young-guns” within the company are invited to participate in senior management discussions in order to offer fresh perspectives and stimulate new thinking.
• RIM – The creators of the Blackberry formed a weekly “Vision Series” for invited employees where new research is presented and future goals are presented.
• Toyota – Famous for its culture of “presumed imperfection” that flows into its philosophy of Kaizen (constant improvement), Toyota launched a “Value Innovation” initiative to find innovative ways to cut costs across entire vehicle systems.

Issues

• How do you select and structure teams without making other employees feel left out?
• How do you measure success when the goals are so broad and general?
• Without a broad culture of innovation, the leadership of a few individuals becomes key and those leaders may have neither the time nor the ability to innovate at a rate that ensures a competitive edge.
• How are employees recognized and rewarded when people put forward great ideas that can be implemented?

3)    Select internal groups to drive specific innovation
Selecting groups of employees to develop and execute innovations that address specific, narrowly-defined opportunities is one of the most common models used by companies to create and execute product and process innovation.  Defining specific opportunities focuses the innovation process and establishes clear and measurable goals against which success can be measured.

Examples

• Lockheed Martin – The “Skunk Works” was formed in 1943 to develop the XP-80 fighter jet that was designed and built in only 143 days. What allowed the Skunk Works to operate so effectively and efficiently was an unconventional organizational approach that challenged the bureaucratic system that stifled innovation and hindered progress within the broader company.  A version of Skunk Works still exists.
• Google Wave – Google established a separate, relatively secret team located in Sydney to develop “Wave”, a new personal communication and collaboration tool.
• BMW – Project specific cross-functional teams are moved to a Research and Innovation Center and assigned a “Project House” that includes all materials and models around that project.  This structure enables quicker innovation through improved communication and collaboration. 
• Michelin – Established a small, hand-selected project team to develop the “Tweel”, a revolutionary new innovation in tire technology.
• Microsoft – The Xbox was initially developed within Microsoft by a small team which was led by a game developer hired specifically for the job.
• Intel – Established a business incubator named the “New Business Initiative” (NBI) that bootstraps businesses started by employees to exploit opportunities around new technologies, markets and models.
• Wal-Mart – Created an internal team to develop, test and rollout in-store medical clinics.

Issues

• What process will be used to pick winners among opportunities that could be pursued?
• Should projects and teams be kept secret and separate from other employees or integrated with regular operations responsibilities?
• How will the separate teams be resourced and how will they be managed?

4)    Internal / External Collaboration (“Open Source” Innovation)
Open source innovation involves collaboration between employees and external groups such as researchers, customers, suppliers and even peer companies.  The idea is that the more brainpower and perspectives brought to bear on a problem, the better the solution will be.  Open Source Innovation really started with software development. The internet enabled rapid communication between many people in many parts of the world and the process worked because the motive was altruistic (the end product was given away for free) and external parties involved saw themselves on the side of David fighting Goliath. The principles of the open source movement are now being adopted by other companies to drive product and process innovation.  In some cases they are able to attract the input for free, in other cases they develop ways to compensate those that provide valuable input.

Examples

• Procter & Gamble – Has launched its “Connect and Develop” strategy with an objective to generate 50% of new product ideas from outside the company.  To do this it lists every one of its patents on yet2.com, a virtual technology marketplace, to facilitate connections and ideas from outside the company. P&G has also formed “Communities of Practice” which are partnerships with scientists, academics and product developers that are not employees. Another example of this model in practice is P&G's Collaborative Planning, Forecasting and Replenishment process (CPFR) that includes its customers and suppliers to improve its supply chain processes.
• IBM – In partnership with Novell, Phillips, RedHat and Sony, IBM created a company called the “Open Invention Network” that owns and will acquire patents and offer them royalty-free to promote the Linux operating system and spur innovation globally.
• Apple – By enabling developers to innovate and create unlimited applications for its iPhone, Apple created more value for iPhone users than it would have ever had the ability or resources to do itself.
• Pediatric ICU at Ormond Street Hospital – In a less traditional collaboration, this hospital partnered with the Ferrari Pit Crew to develop a faster and safer transfer process from surgery to the ICU.
• Zibra – This NC company put together a focus group of stay-at-home women to brainstorm new ideas to help make their lives better.  The first idea they came up with was the “OpenIt”, a tool designed to make it easier and safer to open plastic-wrapped packages.

Issues

• How do you identify who are the right partners to collaborate with and the ways in which the players are connected?
• How do you compensate your collaboration partners? In some instances, people will do this for nothing, while in others they will ultimately have to be paid in some way.
• How do you coordinate collaboration across disparate groups? 

5)    Innovation through acquisition
Acquiring innovation is an effective strategy many companies pursue - even though they may also pursue strategies to drive innovation within their organizations and through open partnerships.  Entrepreneurs are establishing new companies everyday to pursue opportunities in different ways from existing companies.  Many of these companies fail, but some succeed and become attractive acquisition targets.  Acquisitions can be a win for the entrepreneurs who get to “cash out” and can be a win for the acquiring companies that often pay less for an acquisition than they may have had to invest to develop and prove the innovation themselves (if indeed they would have been able to do it at all).  In order to source potential acquisitions, some companies have invested in Venture Capital funds to enable them to get a “first look” at promising new innovations.

Acquisitions are typically made based on some type of underlying strategy, whether that be to expand a product range, enter a new market or simply prevent a competitor from acquiring the innovation.

Examples

• Google – Has actively acquired innovative technologies that complement its own offerings and new product development initiatives (58 acquisitions are listed on Wikepedia with YouTube perhaps being the most well recognized).
• Pepsi & Coca-Cola – Both of these consumer products companies have recently acquired or made significant investments in “New Age” beverage companies.  For example, Pepsi purchased SoBe and Izze (to name just a couple) and Coke has purchased Fuze, VitaminWater and a large stake in Honest Tea.
• Procter & Gamble - Has appointed 70 worldwide “Technology Entrepreneurs” (TEs) that scout for new technology breakthroughs and potential acquisition targets.

Issues

• Do you integrate acquisitions into the company and if so, how?
• How do you maintain the innovative, entrepreneurial employees if your culture is big and bureaucratic?
• How much should you pay for an acquisition that may still be early-stage?

In conclusion, there are five main models companies can adopt to create and exploit innovations to generate economic gain.  Within each of these models there are many specific strategies that can be used.  The right approach for a company will likely be a combination of these and will be different from company to company depending on circumstances. 

One thing is universally true – your company must innovate or die!

Got any other good examples?  Any other models for innovation I am missing? 
 

We could describe the relationship between Entrepreneurship, Opportunity and Innovation in equation form:

                        Entrepreneurship = Pursuit of Opportunity
                        Pursuit of Opportunity = Innovation
        Therefore: Entrepreneurship = Innovation

So, by definition, to be an entrepreneur you need to innovate.  You must create new solutions to problems.  There are two main types of innovation:

1)    Product innovation (“product” also includes service offerings) - creating a better mousetrap.

2)    Process innovation -. developing a cheaper process to make a mousetrap or a unique business model for taking a mousetrap to market

Product and process innovations vary in significance and sit on a spectrum between:

1)    Evolutionary - tweaks on existing products or processes

2)    Revolutionary – major new product or process innovations
 

Why Innovate?
Some business owners and managers may ask: “My company is doing just fine with our existing products and processes, why should we innovate?”

In response, I would ask: “What are the likely results from you not innovating?”  

The results from not innovating will differ in severity from company to company and industry to industry, but some common answers include:

• You lose market share as new competitors emerge with better products and processes
• You miss opportunities that could generate incremental revenue growth and/or cost savings
• You fail to meet customer expectations
• You lose and are unable to attract entrepreneurial employees

Others may say, “We don’t need to innovate because we quickly incorporate the innovations of others into our products.”  In certain circumstances, an argument can be made to adopt a “fast follower” strategy where, rather than creating your own product innovations, you instead quickly copy the innovations created by others.  However, even this strategy requires a significant degree of process innovation to enable quick “reverse engineering” of products and incorporation of changes in production.

Assuming you agree that pursuing opportunities through product and process innovation will benefit your company, the next question is "How do I stimulate innovation in my company?" 

My next blog will outline "5 Models for Increasing Innovation in Your Company".