10: Starting the Design-Driven Lab
The author means to propose a business practice that has been successful with innovative firms - but first, he has a disclaimer: While certain practices seem to be of value, no practice can succeed unless it is supported by a culture - what works well for one firm will not necessarily work for another because its culture., the relationships among its people, are distinctly different.
Many firms say that they wish to be innovative, some make a half-hearted effort to be so, others make an earnest effort to be so - and still fail. This is largely because a practice was proposed or attempted without consideration of whether it is a fit for the culture of the firm. This is the main reason that few firms can be truly innovative, and those that aren't find it difficult to become so by simply imitating the practices of successful firms without understanding the cultural context of that organization.
Basic Capabilities
For design-driven innovation to have a chance at all, a firm must have internal assets (knowledge and capabilities), a process for interpreting them, and a level of empowerment of the key interpreters. In essence, this is having the information to draw a conclusion, a process in place for analyzing that information, and a willingness to listen to and act upon the analysis. It is self-evident that if any of these pieces is missing, a firm will be unable to innovate.
There's some talk of a "privileged network of relationships" in which there is a sense of collaboration and mutual trust between the firm and the interpreters/innovators, both internal and external. If this relationship is unique (no other firm communicates and collaborates with these key people), then the product of the interaction will also be unique to the firm.
It's also noted that the only thing that is unique about any firm is its culture. Other firms can acquire the same kind of equipment, hire people with similar experience and knowledge, and even mimic its processes - but it is exceedingly difficult to adopt the culture of another organization. And it is culture that determines the way assets are used and the way people behave, which ultimately drives the performance of the firm.
It is also culture that gives a firm the willingness to act upon an idea. It is well documented that good ideas (like inventions) are rejected by many firms before they find a home where they are made successful. It is not because the idea was not good, as its success proves its merit, but that the idea was not palatable to the culture of organizations that rejected it.
Building Relational Assets
Traditional management is focused on improving the efficiency of a known process - and as such it has an affinity for procedures and processes that remain largely fixed. Innovation, however, is about replacing these procedures and processes or rendering them obsolete. To foster innovation, a firm needs to abandon traditional management and its corresponding system of restrictions and controls for a more open relationship with innovators.
It is no accident that innovation largely takes place in smaller firms, outside of the structure of the organization. Nor is it accidental that to make any substantial change often requires the engagement of an external consultant who can reconsider the structure and function of the organization without favoring the maintenance of existing structures and relationships. This is not to say that it must be so for all companies, but when a firm embraces the traditional restrict-and-control culture, it necessarily discourages and prevents innovation from occurring.
What is found in innovative firms are the assets (people and processes) to innovate - but more importantly, it is their relationship to the firm. Innovative ideas are not squelched, but are considered and tried. (EN: "tried" is significant here - swinging to the opposite extreme and implementing any novel idea, regardless of whether it has merit, is not at all a good practice.) The firms that are leaders in design have empowered innovative employees, and have had a history of doing so.
A first step is for firms to genuinely value their innovators. A firm that constantly ignores or punishes innovative ideas will find that its people lose the will to innovate. A firm that only superficially and temporarily values new ideas will find that its people lose the will to innovate and are very cautious when the opportunity to innovate is presented. Only a firm that demonstrates in action that it values innovation will encourage and empower innovators.
External innovators are likewise discouraged or encouraged to interact with a firm. Where exernal experts, scholars, designers, journalists, and the media are treated in a hostile and defensive manner, or where they are occasionally engaged with it is in the interest of the firm to use it for its own benefit (positive PR), then the innovative community shows disinterest in having an ongoing relationship with the firm.
A second step for a firm that means to be more innovative is to establish new relationships. Even when existing relationships can be repaired and rejuvenated, there is a limit to what a firm can accomplish by interacting with the same minds. To spark innovation and fuel it requires a constant inflow of new ideas, which largely come from outside the firm. To innovate constantly, a firm must constantly expand its network of relationships.
These relationships do not occur automatically: a firm must invest in proactively searching for innovators and take steps to foster and maintain relationships with them. A common belief among firms is that hiring innovative people give the firm immediate access to their personal network - but this is not necessarily so. It is similar to social interaction - making friends with one person doesn't automatically make you the friend of all of their friends, you must be introduced. And to be introduced, you must be the kind of person that the other party doesn't mind introducing to their friends. So when an innovation-hostile firm hires an innovative person, that person is reluctant to make those introductions.
However, this problem is addressed by the same solution: when a firm empowers and values its internal innovators, they develop a positive relationship with their employer and have no qualms about introducing the firm to other people they know to be innovative. None of this is a revolutionary idea: it's long been known that a firm that treats its employees well finds that its employees connect the firm to others who are similar to themselves. But what is different is the way in which a positive relationship is established with the innovative employee as opposed to the traditional employee.
The Design Lab
The author asserts that "firms often have the seeds of design-driven capabilities. But they do not recognize them or transform them into organizational assets." They seem to expect innovation to happen spontaneously - simply because the ingredients are there.
In some firms, there is a functional unit whose purpose is innovation - it may be R&D, business development, strategy, product development, or even an "innovation" department. Such business units often become ivory towers, unconcerned with the actual operations of the business. They have many fanciful but impractical ideas, and thus are ignored by the rest of the organization.
In other firms, innovation is an ad-hoc process of problem solving where multiple departments contribute resources to addressing an issue. This is often a good way to problem-solve, but such situations rarely lead to significantly innovative ideas because they are focused on solving a specific problem, and that problem is usually expressed in terms of efficiency improvement or growth in known dimensions, such that freely exploring ideas is not on their agenda.
He then describes dedicated "design labs" whose mission is to develop new capabilities, and cites a few examples of how they have been successful in various industries. (EN: However, he does not provide sufficient detail to distinguish between a design lab and an R&D lab, which he previously stated was problematic because it became insular and removed.)
The Role of the Design Lab
The author describes four roles (functions?) of a Design Lab:
- Strategy - The design lab matches innovative ideas to the objectives of the organization and identifies opportunities to drive business and market performance by promoting and leading efforts that require a significant deviation from current business operations.
- Exploration - While other parts of the business are focused on their current operation, the design lab remains outward-facing, bringing in information from external sources (academia, the market, the industry, etc.) This is not research, in that there is no specific objective, but simply "open listening" to discover things that may be of value.
- Networking - The design lab builds and fosters relationships with internal and external innovators, creating a central "hub" in a network of assets who can support innovative initiatives and contribute to the firm's evolution.
- Communication - The design lab nurtures discourse about innovation, continuously communicating and sharing information between those who manage current operations and those with an eye to the future, helping to create an environment in which innovation is seen as a welcome improvement rather than a sudden and unexpected intrusion.
Specifically, a design lab is not an ivory tower - the only place in the organization whose employees are permitted to think laterally. Instead, it fosters innovation across the organization by establishing and leveraging relationships with resources in various parts of the company (and externally). Think of the design lab as an "enabler" of innovation, rather than the center of innovation, to keep it from becoming an ivory tower.
He mentions that small companies do not need a design lab because the company, itself, functions as a design lab: every member of a small firm is tasked with innovating in addition to running the day to day operations. As companies grow, departments become compartmentalized and people become focused on a very small part of the business - it's because of this separation and specialization that larger firms need a department whose task it is to restore the broad perspective and encourage employees to innovate.
Profiting from Design Innovation
Most obviously, firms profit from design innovation when the ideas can be directly translated into a good or service - whether this is a new product for the firm or replaces an existing product line. The quality of replacement is significant: an innovative idea does not improve an existing product, but replaces it with something much better. Initiatives that merely make small improvements are not innovation.
As an example, the author mentions IBM, which underwent a revolutionary change. Originally, it was a maker of office equipment (including computer) which provided consulting services to help customers get value from its equipment. The firm radically shifted to make the consulting services its main product, and the equipment became secondary.
He mentions a few Italian firms, and the manner in which they underwent significant transformations. Each of them began as a manufacturer who leveraged designers to improve its own products - but its designers often stumbled across innovative ideas for other products, and so became consultants to firms in complementary industries. Eventually, these firms gave up their manufacturing operations and became design consulting firms.