Creativity at Work: Linda Naiman on turning ideas into reality

Our approach to innovation has been somewhat focused on the industrial side. We're always looking for ways to help innovators avoid pitfalls and apply processes to improve their returns from innovation activities. It hasn't been as inclusive of the creative aspects that we recognize are crucial to innovation.

To help bridge the gap, I approached Creativity at Work^TM founder Linda Naiman whose approaches toward innovation come from a different point of view. We've been in regular contact for the last 2 to 3 years, updating each other on our work. Linda was happy to share some insights as she is preparing for a creative leadership forum she is co-hosting in Vancouver from September 16-18 along with Ralph Kerle, CEO of the Creative Leadership Forum, Asia Pacific.

Linda has her own definition of creativity that ties in nicely with our approach that focuses on achieving predictable and measurable results from innovation activities. She defines creativity as "the act of turning new and imaginative ideas into reality. Creativity involves two processes: thinking, then producing. Innovation is the production or implementation of an idea. If you have ideas, but don't act on them, you are imaginative but not creative."

Here are Linda's responses to a few questions I asked her recently.

Who were your early role models and what were the main things you learned from them?

My earliest role models were my parents and art teacher in grade school. My parents both encouraged me to be an artist, my father took me to museums and cultural events, and from early childhood we engaged in lengthy discussions about art, life and politics with an emphasis on analysis and strategy. My mother was always an athlete and a naturalist and she gave me a taste for travel and adventure. My grade 5 art teacher, Fritz Brantner taught us to be Cubists, and through him I learned to think in the abstract, and find the essence of the subject matter at hand - a useful problem-solving skill.

What key trends do we need to be aware of?

Innovation, innovation, innovation. It's not just about R&D and new product development. A recent global study of CEOs conducted by IBM reveals that the scope of innovation spans the entire enterprise, but with a focus on the business model and the customer. 40 percent of CEOs report they are changing their enterprise models to be more collaborative, and the study reports extensive collaborators outperform their competitive peers. "Partnering has shifted from tactical 'Enter a new market' to strategic 'Access to capabilities'," explained one CEO from Hong Kong. Collaboration with external inventors and customers plays a key role in nearly 50 percent of P&G's products.

Social Networking is another trend. Flickr, Second Life, and YouTube, are pioneering a new form of collaborative production that will revolutionize markets and firms.

Innovation requires a change in management styles that must shift from a command-and-control model to one of designer and coach. Organizations world-wide are discovering the merits of artistic and creative training. The arts-based skills transfer directly transfer to management: how to take risks, what motivates people, and how to engage your audience. Companies like P&G and Unilever have brought art and design principles into the practice of management and leadership to increase market share.

What is an example of an innovative company that people have never heard of?

Three companies who provide an innovative service online: Seattle-based TeachStreet, helps Seattle-based teachers and students connect. Students can search for teachers across more than 25,000 courses and filter the results according to location, ratings from other students, teacher availability, promotional pricing and more.

San Francisco-based Carrotmob aims to organize consumers to provide an economic incentive to companies for making positive environmental changes. The group hopes to begin by creating a broad network of consumers and forming partnerships with other larger advocacy groups. Next, it plans to implement campaigns focusing on different industries. Carrotmob will then approach the companies in each industry with suggestions, and invite them to make the changes they have identified.

Toronto-based Parkingspots.com connects those who have parking spots to rent out with those who need them on a monthly basis.

How do you measure innovation or creative success?

Two possibilities are Michael Porter's Innovation Capacity Index, and Richard Florida's Global Creativity Index.

Michael Porter says, "Innovation intensity depends on an interaction between private sector strategies and public sector policies and institutions. Competitiveness advances when the public and private sectors together promote a favourable environment for innovation." United States is number one followed by Finland and Germany. Canada is 10^th on the list.

In the Flight of the Creative Class, Richard Florida outlines what he coins the Global Creativity Index, which captures the ability of a country to harness and mobilize creative talent for innovation, entrepreneurship, industry formation and long-run prosperity. It measures technology, talent and cultural tolerance. Top of the list is Sweden, followed by Japan, Finland, US and Switzerland.

We'd like to thank Linda for helping bridge the gap between creativity and measurable innovation results. This helps us turn great ideas into reality.

Innovation Under The Golden Arches - What is McDonald's Up To?

Idris Mootee often spots trends in innovation that have somehow have ended up under the radar of the mainstream media. His recent piece, McDonald's innovation in Europe, caught my eye because this latest move by McDonald's is less an iterative change or a nod to cultural differences than a wholesale rethinking of their overseas business and perhaps their worldwide business model.

What McDonald's is doing is (finally) catering specifically to the tastes of the countries in which they operate by offering such staples as porridge for breakfast in the U.K. and soup in France. Denis Hennequin, president of McDonald's Europe, the first non-American to hold the post, is behind all of these new innovative ideas and he has his chefs in Munich cooking up even more to come for the 41 European countries McDonald's Europe serves.

One wonders if this is a reaction to the increasingly skeptical way in which those around the world view all things American. Where once The USA was the golden land and all things American were lapped up with enthusiasm, a confluence of events in recent years has led to a healthier view of America and American companies' role in world affairs - that is as a player, not necessarily THE player.

Or perhaps the alarming rate of obesity with its loose links to consumption of fast food has provided the wake-up call. Either way, we're seeing fast food chains innovate in a variety of ways to combat this change in worldwide eating habits, competitive pressures and a recessionary climate.

While fast food chains in the US struggle with consumers tightening their pocketbooks, overseas McDonalds is taking a more innovative approach and perhaps they are once again leading the pack.

... the whole fast food industry is ripe for a complete makeover, not a botox job. It needs to redefine its customer experiences and take a hard look at what "fast food" means. Fast food doesn't need to be "junk food". I think everyone in the industry better start looking at what is needed to transform this industry.

In other ways, McDonalds is bringing a new customer experience to the fast food customer, though, perhaps lagging a bit behind popular chains like Starbucks. While fast food has long been a staple of budget minded young people. McDonalds is just now testing wireless internet access and linger-friendly environments with comfy seating and larger tables. Could McDonalds replace Starbucks as the "office away from the office" for the budget minded set?

Whether all of McDonalds new innovations take hold remains to be seen. The various scenarios being tested seem to focus on two trends - targeting and addressing the needs of a younger market... one more wired and more health conscious; and integrating McDonalds more into the culture of the countries in which it operates. Both are tried and true strategies, so in that way, the approach is not innovative. But as I have mentioned before, innovation isn't necessarily about "new to the world" inventions, but often is achieved by applying existing knowledge in a new way.

Why not spend money on a Patent?

Success rates for new products, including patented ones, are shockingly low. For even the world's largest and most sophisticated companies, the numbers are about 25% - certainly below what most managers and owners would like.

There are several references that give the failure rates for new product introductions. The normal range is typically from 70 to 80%. These sources include:

1. Various studies cited by Advertising Age,[i]
2. A study[ii] by Linton, Matysiak & Wilkes, Inc. of the top 20 food companies reviewing 1935 new products,
3. A Booz Allen Hamilton study[iii] on new product management that claims one out of seven product ideas yields a successful product,
4. Boston Consulting Group vice presidents and directors James Andrew and Kermit King claiming 60 to 85% in an article[iv] titled 'Boosting Innovation Productivity',
5. Some college textbooks[v] claim 80%.

A study[vi] by the Product Development and Management Association titled 'The PDMA Foundation's 2004 Comparative Performance Assessment Study (CPAS)' shows 40% rather than the higher 70-80%. The PDMA figure appears to be based just on the post-commercialization or post-launch failure rate. It does not include all products that go into the development pipeline, rather just those that make it to the launch pad. Including all the steps from idea generation, the PDMA study failure rate is over 80%.

Companies stay alfloat because the products they sell, including new products, rarely rely on patented subject matter. Companies derive about a quarter of their sales and profits from new products, only some of which are patented. The other three quarters of a company's sales and profits come from yesterday's breadwinners that still have years left in their product life cycles.

So what happens if a company stops innovating? In most cases, it will slowly die. Companies operating in a competitive marketplace need to continually introduce new products or products that are better, faster, or cheaper in order to stay in business. They don't need to overdo it with innovations, but there is a need to have something in the works. Companies that are leaders in innovation become the pacesetters for the rest of the industry. The other players are forced to keep up or get knocked out of the never-ending race.

Another factor that stimulates the corporate innovation process is the tantalizing prospect of huge profits from world-beater innovations. For the few innovations that become blockbuster commercial hits, the rewards can be great. Companies that come up with such innovations and exploit them well can end up dominating their industry categories and raking in huge profits.

Does this mean small businesses need to come up with ideas and file patents on them? Let's look a little closer at the numbers as they apply to small businesses rather than Fortune 500 companies.

Only about one quarter (1/4) of the products that go into the development process end up being successful. This is a deplorably low figure that applies across a wide range of industries. The data comes mainly from well-established companies, typically the top ones in the various industries. In other words, one in four successes is currently accepted as the best that can be done in terms of converting ideas introduced to the development process into successful products.

What happens in the case of start-up companies? For these companies which are usually quite small, there is a whole other set of failure rate data involved. U.S. and Canadian statistics reveal that only about one third (1/3) to one half (1/2) of new companies remain in business for at least 3 to 5 years.[vii]^,[viii]. About a third of them make a profit during that time, another third break even and the remaining third lose money. Many of the companies that close their doors within the first few years do so because of business failures. Running a profitable business is obviously not easy.

Let's multiply the survival probability for a start-up company with the new product success probability. This makes the overall likelihood of success for a start-up company successfully developing and commercializing an invention or new product small. The math looks like (1/3 to 1/2) x 1/4 = 1/12 to 1/8 overall likelihood of success. Since the probabilities are not entirely mutually exclusive, the more forgiving 1/8 figure will be used. Determining what influence one of these variables might have over the other is beyond the scope of this article. In any event, a 1 in 8 or 12.5% chance of success seems somewhat risky which is why venture capitalists and finance people generally have a hard time dealing with start-up companies based on a new product idea. However, a well managed start-up company with a highly successful product can generate a phenomenal return.

From these numbers, it appears that the vast majority of patents are not worth the paper they are printed on. Here are five reasons a small business should look twice before calling a patent agent:

1. It usually costs between $5,000 and $20,000 to obtain a patent. These costs include the fees paid to the patent offices in one or more countries and those fees paid to the patent agents, many of whom are attorneys. These do not include the internal costs for having your key people sitting in the patent agent's office or working on the patenting aspects.

2. It normally takes about two or three years to obtain the patent and can take much longer if there are problems. Some innovations become worthless in three years, much less than the 15 to 20 years covered by a typical patent.

3. A patent gives a complete disclosure as part of the requirement for obtaining it. In other words, your competitors know exactly what you are doing and how you are doing it. This is especially so with recent changes to the U.S. patent rules that publicly disclose the entire contents of the applications 18 months after application, regardless of how long it takes for the application to get processed.

4. Most patents don't offer any real protection since they are often narrowly defined and easily circumvented.

5. The patents become extremely expensive when they become litigated. Usually the patent owner is the one who initiates the litigation. This is because, in practice, a patent is little more than a right for the patent holder to sue an infringing competitor. These costs can run into the hundreds of thousands or millions of dollars. After years of expensive and complex litigation, the infringer often does not end up paying much, if anything, to the patent owner.

Spending the same time, money and effort on your up front marketing would be a much better approach for most small businesses. Up front marketing does not include promotional and sales expenses but does include going out to determine what the real market is for the proposed or actual product. It includes focus group testing, trial selling, surveys, tradeshows, etc.

Look before you leap when you have an idea that might be patentable. At least you should do the math first.

Peter Paul Roosen has an engineering background and is co-founder of Atomica Creative Group , a specialized strategic product marketing firm. He has co-authored Overcoming Inventoritis: The Silent Killer of Innovation now available.

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[i] Brock, D. (1997). Getting the most out of your new product introductions. Partners in Excellence. http://www.excellenc.com/articles.htm

[ii] Linton, D.B. (1997, July 1). Market study results released: new product introduction success, failure rates analyzed. Frozen Food Digest 12(5), 76.

[iii] Dean, B. (2005, March 28). Case study: Incorporating focus group research into the product development process. DM News, Article 32310. www.dmnews.com/cms/dm-news/e-commerce/32310.html

[iv] Andrew, J.P. & King, K. (2003, April). Boosting innovation productivity. BCG opportunities for action, April 2003. http://www.bcg.com/publications/publication_view.jsp?pubid=847

[v] Friedman, H.H. (2000). Product policy; new product development. http://academic.brooklyn.cuny.edu/economic/friedman/mmproductpolicy.htm

[vi] Adams, M. & Boike, D. (2004, July). PDMA foundation CPAS study reveals new trends. Visions, XXVIII:3, 26-29; and: The PDMA Foundation’s 2004 comparative performance assessment study (CPAS). PDMA Foundation. www.pdma.org/cpas.php

[vii] Knaup, A.E. (2005, May 1). Survival and longevity in the business employment dynamics data. Monthly Labour Review 128:5, 50-57.

[viii] Baldwin, J., Bian, L., Dupuy, R., Gellatly, G., Statistics Canada (2000, February). Failure rates for new Canadian firms: New perspectives on entry and exit. Minister of Industry / Statistics Canada Catalog no. 61-526-XIE. www.statcan.ca/cgi-bin/downpub/freepub.cgi

Practical reasons for strengthening member to member network ties

Here is mini article we put together for the Burnaby Board of Trade. Practical reasons for strengthening member to member network ties:

1. Relationship: It's easier to call or email a fellow member and start building a relationship. Having membership in common creates a good starting point. Plan to meet at an event. It is almost always preferable to do business with someone you know and have developed a relationship with than it is to place your trust with a complete stranger.

2. Consistency: Developing a relationship with a group of people that you see on a regular basis has its advantages. You become familiar with their products, quality, needs and also the various shortcuts that can be taken to achieve your desired ends. For example, if you use a local printer for your stationary needs, they will likely keep your artwork on file so that re-orders are relatively easy.

3. Complementary: Member businesses are diverse and may complement your business, becoming good referral partners. This will allow you to be a better resource to all your contacts and clients.

4. Community: Because of the closer ties, people will be more compelled to go the extra mile. It is a natural to put in a little extra effort to help a friend or someone you know.

5. Accountability: Fellow members can usually be more easily held to account than firms that you have no ties with outside of the immediate transaction.

6. Activity: Business and people that are actively involved in an association tend to be more connected to the business community and interested in connecting with people than those who are not involved in such networks.

7. Productivity: Working more closely with fellow members can lead to productivity enhancements in your business. Sharing relevant information and developing informal mentorship relationships are a couple ways to do this.

8. Cost: It often costs less to do business with someone who you know through an association. Check out the current list of members who offer a discount to fellow Burnaby Board of Trade members as one way.

Innovation and The Vancouver Olympics

Next Up: Vancouver. For many Canadians, watching our athletes perform in China is only half the attraction of the Beijing Games. Sure, it's great to see Canadian athletes pick up medals but with the 2010 Winter Olympics scheduled for Whistler, there's more than just an interest in sports.

Expected to give a big boost to business and spotlight some of the rapidly growing, B.C. based companies, the Winter Olympics and how to capitalize on them is of top concern to many executives in the area. A number of executives from a variety of companies traveled to Beijing this year to assess the opportunities.

While it's the sport and spectacle of the Olympics that will be in the public spotlight for the next 17 days, a cadre of B.C. business leaders is headed to Beijing with more than secondary interest in the behind-the-scenes activities.

Game organizers and those responsible for ensuring the events go smoothly, as well as local tourism departments, will be watching to see how well the games are orchestrated. Number crunchers will attempt to quantify the costs and benefits of bringing the games to British Columbia. Business, large and small are looking at Beijing as a jumping off point for the high profile coverage they can expect to obtain when the Olympics make their way to Canada.

Many 2010 sponsors are also in Beijing, or on their way, to honour their obligations as supporters of the Canadian Olympic team, and to learn about ways they can roll out their own hospitality programs a year-and-a-half hence.

"We're hoping our presence there will help our profile as a company," said Doug Horswill, senior vice-president for environmental and corporate affairs at B.C. mining firm Teck Cominco Ltd.

The bad news for local businesses is that the Beijing Olympics disappointed. The anticipated surge of activity failed to materialize. One Chinese business owner put it succinctly:

"Everybody thought the Olympics would be great for business," he said. "It turned out differently."

A combination of tight security, high prices and the big unknown of China combined to keep tourists away. Will this also be true in 2010? Canada, an established, industrialized, capitalistic country isn't quite as exotic as China and most probably won't elicit the same level of concern from tourists, but the two big unknowns, the world economy and the security situation, i.e. any new terrorism or conflicts could impact how much benefit the Olympics will bring to British Columbia.

Investing in Olympic licenses and developing Olympic related promotions is expensive and risky. Huge sums of money are spent every 4 years to create tie-ins for the few weeks of Olympic season in the hope of lasting benefit.

What can innovators do to maximize the exposure and reduce the risk? Our take is simple. Integrate Olympic based activities into the business plan. Think both inside and outside the box. Create solid, programs that mesh closely with your company's mission statement and overall business strategy. Team up with closely related athletes or activities - think long term relationship.

The 2010 Olympics my only run 17 days but the benefits could last quite a bit longer.

Moving From Marketer To Content Creator Drives Sales In a New Era

Often lost in the discussions about innovation is the role that enlisting consumer, especially key influencer, support is in determining the success of a new product. Despite hours spent in labs and on exacting market research, many an innovative discoveries fail because of ineffective launch strategies.

Identifying and building relationships with opinion leaders is something we try to do in all of our projects from well before the product launch. This is, of course something that the software industry does on a regular basis, enlisting developers in the early stages and releasing beta versions for testing.

In the consumer products arena however, this is used somewhat less often and frequently results in lower visibility and ultimately less success. In an age when consumers are easily accessible through the internet, it seems almost irresponsible to ignore this opportunity to involve them in the early stages of development and create an active community of supporters prior to launch.

An article, How to sell Vodka, discusses how one company, using limited resources, created a hot new product by using the power of the internet and word-of-mouth marketing to build a winner in the distilled spirits category.

"We can't do things with more money or more people. Our aspiration is to find people - customers - who are discoverers and disseminators."

In an era when budget cuts force companies to look for creative ways to market products, innovators are changing focus from top down marketing to content creation.

"We have gone from being a marketer to being a content provider," Phillips said, and he wasn't referring to the contents of a cocktail glass. "Our job is to create photos and tools and content that others can use to build our brand."

How to implement or even initiate this strategy leaves established marketers scratching their heads and grasping at straws. This is, perhaps why it is often the purview of smaller, quicker, younger companies filled with entrepreneurs not MBAs.

Working the web, filled with social networks, blogs and message boards can be a daunting task for the uninitiated. Navigating the realm of social marketing in search of key influencers requires an understanding, not of strategy, but rather of tactics of the web that may be unfamiliar to mainstream marketers.

But that's where the innovators of the product adoption cycle reside these days - on the internet.

Word-of mouth marketing is rapidly replacing aspirational marketing as the tactic of choice for rapidly growing companies. Yes, celebrity endorsement still has the power to drive sales, but a positive review from a well-known blogger can often add legitimacy to a product claim. Viral marketing campaigns and well-executed online PR campaigns reaching key influencers often perform just as well as a mass media ad buy, particularly in smaller fragmented categories. Original content, particularly amusing YouTube videos can raise awareness faster than broadcast ads (though reposting those on YouTube works well too) as they rapidly spread from user to user.

As companies, large and small, scramble to refocus established marketing departments in the new era of Web 2.0, creative strategies evolve to become personal. Content creation becomes the goal. And it is, of course, not your "father's" content. Hipper, of course, but more honest and interactive as consumers play a greater role in influencing product design.

Innovation Going Green - B.C. Government Helps

By now, those of us involved in innovation, no wait, everyone, whether involved in innovation or not, knows that green inventions are the hottest new thing. It seems that the Canadian Government knows too... at least in B.C.

As I've written about before:

Canadian companies are very reliant on the Natural Resource Sector - the drill it, mine it, chop it mentality.

So, it's not terribly surprising that this government effort is focused on energy. The B.C. plan offers a 30% tax credit to early-stage investors in companies engaged in the research and development, commercialization and/or manufacture and processing of clean technologies in British Columbia and employing B.C. workers.

"Innovative clean technology reducing GHG emissions will play a key role in helping to grow B.C.'s green economy," said Technology, Trade and Economic Development Minister Ida Chong today. "The tax credits will lever up to as much as $25 million annually in venture capital to support clean tech companies that can offer exciting employment and investment opportunities to British Columbians."

The goal is, obviously to get on the cleantech bandwagon. Moving from old line energy producing industries makes sense as a diversified economy is in the best situation to ward of the impact of the possibility of unemployment driven by the almost certain recession soon to come.

British Columbia is already home to the third largest Cleantech cluster in the world, growing at an annual rate of 11% a year. Naikun Wind Energy Group Inc., which plans a wind farm off the coast of British Columbia, had one of the best ROI in Canada in the cleantech field.

Companies in British Columbia conduct research and development in a variety of fields including: transportation, energy efficiency, wastewater clean air and fuel cell development. More are in early stage development or searching for investment capital.

And, with the increased interest in green, that is sure to continue.

There are now close to 100 cleantech companies listed ion the TSX Venture Exchange, (The TSX Venture Exchange is Canada's public venture capital marketplace for emerging companies). Market value of these companies is more than $13 billion. But hard times could be coming.

The creaky economy and the booming successes in 2007 has led to a slump in 2008 in the TSX Venture Exchange. Entrepreneurs and established companies are struggling to maintain the growth rate enjoyed over the last few years. Investors are leery of banking on new technology in an era when consumers and businesses are hunkering down and payouts may be years in the coming.

Will this tax incentive make a difference?

We think it will. As evidenced by the Abenga Solar case in the U.S. tax credits can make a big difference. Without tax credits, a clear sign of support from the government, funding for risky, new technology projects can easily fail.

In an already tight credit environment, tax credits can make the difference between private funding of a project or not. Investors clearly see the benefits of investing in a field supported by those government entities charged with economic growth.