Wednesday, August 13, 2014

Time for a Total Innovation System

By Ricardo Dos Santos
Director, 4iNNO
Lecturer of Entrepreneurship & Innovation, San Diego State University

My days as a practitioner and student of Lean Production at AutoEuropa (VW) and MIT taught me a simple, but value lesson – “It’s the System, Stupid”

All the different components of “how to do more with less” were available (production efficiency and reliability, quality, supplier integration, employee involvement, etc.) – Toyota was first to put them all under one umbrella and “drove” the company by a well-integrated, waste-reduction system – and a strategic battle cry to boot (win by being the best)!

When I turned my attention to Innovation Management (beginning with internal and external benchmarking studies I conducted at Qualcomm and continuing today), I noticed it was “way behind” production management. No company had a complete and reproducible system and the few individual intrapreneurial heroes that were succeeding, were succeeding intuitively (or thru luck), succeeding despite not because of a system. Every company has innovation efforts to showcase, alas mostly disjointed, territorial, subservient (to sustaining R&D spend or prolonging existing business models), boring, unambitious, delusional, over-bloated or starved. The corporate innovation situation isn’t just wasteful, it’s shameful. Professional innovation management has not arrived, not surprisingly, since Innovation as the strategy has not arrived (Strategy today is largely about controlling what one can see, not commitment to creating new sources of happiness for mankind, aka, Innovation).

Steve Blank whom I didn’t know at the time, was pointing out flaws in the startup system – which was even more depressing!  The good thing was that Lean Startups were becoming a thing, with a promise to match the impact of Lean Production (again, with the same simple motto of “if it’s worth doing, it’s worth doing systemically.”)

So I think we can now begin to think about Innovation or the production of ideas as we think about production of things.  All the individual components seem to be there (Design Thinking, Agile Development, Business Model Generation, Experiential Learning, Staged Risk Investments, Horizon/Portfolio Management, Disruptive Innovation, Open Innovation, etc.).

Thus, for a single company, we can migrate from talking about innovation in disparate terms to a Total Innovation System comprised primarily of:

  • Values & Mindset
  • Governance
  • Strategy (Functions)
  • Structure (Forms)
  • Processes & Tools
  • People & Incentives

My personal term for Total Innovation is “Collective Entrepreneurship”, emphasizing an ultra-connected support ecosystem and the bold nature of entrepreneurship – Florence and Silicon Valley are good regional examples.  Regions can become this, but companies cannot under current design – they must change several structural components, mindset, and governance.

So if we really believe “it’s the system, stupid”, the corollary big idea is to NOT do an innovation initiative in a vacuum (been there done that myself!).  Things have to be done, rather explored, in concert.

Thus, for example, if you are having an innovation pilot project within a business unit to see if they can use Lean Startup Processes to best develop their idea, what else is being assessed?

  • Is the nature of the idea itself testing the strategic boundaries for the company (i.e., what it will and what it will not do)?
  • Is the idea fitting a portfolio gap of some importance?  Is it chipping away at a bigger thing?
  • Is there a structural support system that is also being tested?  (Doing ideas within the BU’s themselves, supported by a corporate staff/R&D/mentors?)
  • Is there a commitment to Decision Making based on innovation vs. execution metrics?
  • Is there a unique “pay back” tool being tested? (e.g. Value of Experiments™:  Option Value + Strategic Value + Exit Value)
  • Is there a unique employee development and incentive system being tested?
  • Are the foundational values being grasped ?

Time to see innovation as a holistic practice, imbedded in the fabric of the corporation much like what we have done with Lean Production (including Quality Management).  We now take for granted that Excellence in Execution happens everywhere throughout a company and its supporting partner ecosystem – It’s part of the “job to be done” by the system as whole, as Tony Ulwich would say. Isn’t it time that Innovation also becomes part of the job to be done, the very nature of the corporation (and not just of startups and government)? Skeptical? Fine. We can always stick to maximizing shareholder value as the purpose of the corporation… but not if I can help it.

This article originally appeared on

About the Author

Ricardo dos Santos is a leading expert on entrepreneurship and innovation, having amassed more than 20 years experience driving internal ventures at major corporations and founding and leading early stage startups.

In 2012, Ricardo brought that experience and his vast knowledge of the Lean Startup methodology he learned directly under its creator, Steve Blank to Biological Dynamics, a molecular diagnostics startup focused on oncology. Serving as Biological Dynamics’ chief business officer, Ricardo has helped the company search for a scalable business model while successfully securing multiple rounds of funding

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