Innovation is often associated with radical, pioneering products and services that fundamentally change the way we interact with the world. Those items that take decades in intense product development and testing, sprung from great minds and very large R&D budgets.
But sometimes innovation just arrives from simple ideas or the right circumstance.
Innovation can happen anywhere freedom of thought and creative problem solving is allowed and fostered, where failure is not feared, and there is no prejudice to where ideas come from. I think of innovation in organizations as innocent opportunism, where people at all levels are allowed to question and test new ideas and approaches, always looking for new ways to do things differently.
I love the history behind CHEP pallets. NPR produced a podcast on their story, and you can listen to it here. Pallets don’t really come across as radically innovative products, but we can learn a lot from CHEP and what they accomplished. For a long time, pallets in the US were made by local companies for their own communities and as you can imagine, there were of varying levels of quality. They were cheap, but they did what they were intended to do – make things easier to be picked up by forklifts.
When US troops left Australia after World War II, they left behind tons of wooden pallets used to ship supplies over from America. The Australian government saw an opportunity and founded CHEP (Commonwealth Handling Equipment Pool), producing a stronger pallet able to be handled from any side, where previously-made pallets could only be lifted from the front or back. Instead of selling the pallets out right, which were more expensive because of an increase in quality, they rented them and picked them up after use. They also painted them blue so they could be easily recognized.
CHEP pallets are now the industry standard and there are 78 million of them circulating in the US. Companies like Costco now mandate their suppliers use CHEP pallets because of the cost savings they experience from renting versus buying, and the product’s superior quality.
CHEP used innovation to solve a problem that people didn’t even really know existed.
There’s a mindset shift on display here. We can get comfortable because “this is how it’s always done” often translates to “this is the best way.” But when we realize something has always been done the same way is precisely the moment when we should question if it can be improved. Something may be tried-and-true now, but it wasn’t always. At some point in the past, that same thing was the innovation.
It’s easy to forget that there’s most always a better way. There’s probably nothing in the world that exists today that simply cannot be improved upon. But can you take innovation too far? In the CHEP story, one pallet manufacturer trying to compete tried plastic pallets with RFID tags for advanced tracking. But at the root of the pallet industry is a truth – that people want cheap pallets. The manufacturer over-innovated to the point the product wasn’t wanted.
“There are two interesting things about innovation,” says Jesse Edelman, ArchPoint CEO. “The first is about product or service variation. To use CPG as an example, offering the same product in a different flavor or changing out sugar to sweetener isn’t what I consider true or leap innovation. But because companies are constantly attempting to get more shelf space, they get caught up in doing variations of the same. The second thing is that innovation absolutely should not be limited to products. It can apply to any part of the value chain that we work in every day – packaging, supply chain, selling strategy and beyond.”
You must consider that innovation can come at you in so many different ways. “For a cutlery client, we recently took a package of 24 forks, turned half of them upside-down and reduced packaging 35%. It’s not sexy, life-changing innovation, but it’s good innovation. We can now put the packaged cutlery sets in trays with covers that eliminate the need for box cutters. This reduces labor and improves in-stocks. Again, it’s not sexy, but it really made a difference for our customer,” says Jesse. The packaging has since been adopted as an industry best practice.
Part of the reason innovation is so difficult is because we are too close to what we are making or selling.
“We aren’t objective enough to have the latitude to think differently. We spend so much time focusing on what’s next we don’t focus on what’s now. If we poll retailers and customers, they would much rather see an evolution or step change in the parts of the products they have already made a commitment to buying. I hear all the time: What are you doing about the products I already buy? Expansion is expensive. The cheapest thing we can do is innovate the products we already have,” says Jesse.
“Once you open your mind to the fact that innovation can come in different shapes and forms, challenge those that live in the function every day to participate in your ideation. I can tell you even the simplest supply chain innovation might come from your customer service person. They touch it every day. But they don’t know if they have a voice to make a suggestion.”
Guy Kawasaki did a wonderful TEDx Talk, The art of innovation, that I highly recommend about innovation. Below are some key points from his presentation.
- Make meaning. Start with a desire to make meaning and you will likely make money. (Example: YouTube and videos)
- Make mantra. Don’t create a mission statement or a slogan. Choose 2-3 words that say why that meaning exists. (Example: FedEx “Peace of mind”)
- Don’t worry, be crappy. If you wait for perfection, you won’t ship. Everything new will have some element of crappiness to it. (Example: the first laser printers)
- Polarize people. Great products polarize people. Don’t be afraid of it. (Example: TiVo)
- Churn baby, churn. Ignore naysayers until after you ship and then start listening and evolving.
- Perfect your pitch. Customize your introduction for customers and follow 10-20-30 rule. (10 slides in 20 minutes in 30-point font.)
- Don’t let the bozos grind you down. Rich and famous doesn’t equal intelligence, it equals lucky.
Innovation isn’t easy. To think innovatively, we must not worry about being safe. We must push and resist the temptation to do what has been done before. And we must look for opportunities everywhere.