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How Co-Creation Leads To Successful Innovation

This post builds on our previous Broad Framework For Transformation and the subsequent piece that focused on the vertical dimension From Understanding Customers To Business Model Reinvention. This piece talks to the core of the horizontal dimension of the framework.Innovation Means …

Definitions of innovation continue to abound—sustaining, disrupting, process, technological, digital, business model—are just some of the different spins that put on this word (innovation). I liked this from Wikipedia:

“While a novel device is often described as an innovation, in economics, management science, and other fields of practice and analysis, innovation is generally considered to be the result of a process that brings together various novel ideas in a way that they affect society. In industrial economics, innovations are created and found empirically from services to meet the growing consumer demand.”

To me, true innovation is inherently about exploring first the ‘why’ and then the ‘how’ of coming up with new ways of creating and/or delivering value. It’s not just one or two people having a brilliant idea; it’s translating that idea or invention into something that creates value for a customer. It’s a team sport. That’s where co-creation comes into the picture.

“The customer is now seen as being directly and actively involved in the key moments of value creation as opposed to passively consuming value.” Esko Kilpi

But customers are not just those external to the organization. Sure, ultimately, external customers provide the income that funds business operations, but thinking of “service enabling” internal business functions also represents a form of innovation.

The point is that having a great idea is not (and was never) enough. You need to ‘operationalize’ the idea, and that means engaging customers, the people inside the business and its partners. That implies executing changes to current business operations to get the product or service launched. It’s a bit like left and right-brain thinking—like design thinking and operational excellence, like a business vision and continuous improvement—one needs the other for long term success.

Innovation Means Change

Whether at the macro level of responding to market evolutions, the actions of competitors, and the ever evolving expectations of customers; or at the small scale of working practices, processes and organizational functions—change means needing to re-think customer value, and how to deliver this value. For innovation to succeed, the organization, and the people within it, needs to start to think ‘outside-in’. If the scope is an internal business unit, then rethinking the role of that unit outside-in will also make a compelling difference.

And that’s where the challenges start to emerge. There are very many reasons why others might want to maintain the status quo or pursue a different course of action:

  • Their mental models conflict with your assumptions. They see the world differently; a way that is completely at odds with the new value proposition you see. They may challenge the frame of reference for your concept.
  • They may not even see a problem. They believe that things may not be changing as rapidly as you do. There is no urgency and therefore no need to even contemplate doing things differently. They may challenge the need for the change directly.
  • Some may have an alternative approach. They may have a competing idea, or an initiative sponsored by another executive that responds to the strategic intent. They will look for any hint of an error in the logic.
  • They may feel threatened as your innovation challenges their current position or status. They’ve spent their entire career climbing the corporate hierarchy and your innovation challenges the need for that structure. Expect passive resistance. They’ll nod at the right times, and may send someone to your meetings (to report back), but do little to help it come into existence.
  • Often, they are incentivized to not see the world that way. Their bonus is tied to the execution of the current business model and your ‘new’ innovation is something in which they have no interest. They may point to how your concept threatens to dislodge the current core business.

In the end, people tend to resist changes that don’t align with their perception of what’s needed. Perhaps more importantly, if they don’t have a hand in framing the question and exploring the options, then they are not interested in somebody else’s answer.

So for most innovators—whether internally or externally focused—rather than coming up with the initial idea, the real challenge is to overcome the road blocks associated with operationalizing the concept. Organizational inertia has a way of wearing down, or whittling away, improvement ideas to ensure that nothing really changes. Over time, most organisations become entrenched in how they operate. Individuals lose sight of their customers and how to provide value—i.e. they think and operate ‘inside-out.’

Successful Change Is All About Engagement

How many change management consultants does it take to change a light bulb? 
Answer: Just one; but the bulb has really got to
want to change!

We hear phrases like “Change is harder than you think,” “People always resist change,” “It always takes a long time,” and “We’ve tried that before.” But hold on; are these adages always correct? The reality is that people resist change when it is imposed or done to them (rather than by them).

The ‘tell-sell’ approach to change just doesn’t work. For example, the CIO of a major brand—let’s call him Tony—wanted his business architects to adopt a standardized Business Architecture method within the organization. Tony’s problem was that, with a federated organizational structure, he had little direct power over the resources that currently performed the work across the enterprise. They all reported to different business units, each with their own parochial agendas.

In planning the workshop, I asked him, “What change in behavior are you expecting by standing at the front of the room and telling them what to think?” Good point he responded. We already had a clear idea of what good looked like, but persuading 50 people to standardize their working practices was only going happen if they co-created those working practices.

Tony got a much better result—a richer and more compelling set of methods—when he engaged the collective knowledge and expertise of the crowd. He found that:

  • Value co-creation occurs when you engage employees into re-thinking how they address their customers’ needs. These customers might be internal or external. When they’re internal customers, it’s the operating model that they are working on. When they’re external, it’s usually the business model that’s being explored. Either way, it’s when you bring your people together as teams to design that experience then breakthroughs happen.
  • Quasi-competitive teams that share artefacts at regular intervals created rapid evolution. When the teams work through an outline structure which forces them to rethink the relationship outside-in, a much richer picture emerges. They steal each other’s ideas and incorporate them into their reworked value proposition.
  • The teams define the new services and products by working outside-in. By working outside-in—starting with the persona and “job-to-be-done” before thinking about the customer’s journey and then their ideal experience, the team can focus on developing service definitions that align your capabilities and processes to deliver that value.
  • If you engage your staff to design their future, it’s theirs. As you engage—both internal and external resources—they build on the ideas of those who have gone before. Along the way, as the core innovation concepts are operationalized, processes and working practices need to evolve as wrinkles get discovered and worked out.
  • The teams design the core of the target operating model and change program. They’ll also identify where those capabilities require additional work and how to make them more robust. But don’t let them get locked into the design of “to-be” processes until they’ve developed a compelling target vision. They can then iterate toward that vision.
  • The key difference is that the participants then champion the new ways of working. The real benefit is that the new working practices were created by them, for them. They test out the new concepts that they have developed. They capture and embed feedback from customers and colleagues, embellishing the service proposition; often incorporating unexpected elements into the new innovation, making it more compelling and powerful.

Your furniture (or systems) will not transform your business. No consultant can do this for you; but they can help facilitate the discussion. It is your people that make it happen. Usually, they haven’t felt empowered to make improvement suggestions. Yet it’s your front line employees that probably have the deepest sense of what the customer will value.

Co-creation is an essential part of that process. Indeed, involving the people most affected is the best way of getting any seed of change to take route and flourish. You harness the creativity of the crowd to overcome the roadblocks of change. People don’t want to be told the new answer to someone else’s stale question — they want to take part in fleshing out the question and the solution.

 

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