Why "Value Thinking" is important for being innovative?

I work in a IT service firm and there is a continual expectation from our customers on “innovation”. The target audience are customers who outsource or offshore IT, business arena of work to save costs, leverage value and focus on their “core” area. We all know this very well and this is the story of outsourcing in general- Let’s not get there as that will fill another 20 pages! :-)). In this blog and in this context, I am only picking a subsection which is “innovation” and that seems to be the expectation from everyone. Fair one, is’nt! When they are outsourcing millions of dollars, the expectation from them on firms to innovate is obvious, right? Even when I am paying continual $$’s for my vegetables-fruits-on-demand-service provider, I am expecting him to be innovative. Don’t ask me how but I am expecting as I am paying some $$’s. :-))

Here is the small disconnect and the premise of my blog- All Indian and US IT firms can definitely innovate on process and technology but to innovate on customers business requires “value thinking”. IT firms have “operations/delivery” folks and “relationship/engagement” folks – These folks seamlessly integrate the fabric of delivering services to the customer expectations. The disconnect on innovation comes specifically on “value thinking” as you move upwards to innovate on customer’s business, “changed mindset” from the service providers/customers and “courage” [required leadership trait]. All these three are interconnected and it’s important to join these three so that we get the holistic picture!

Let me expand on “innovation”- I agree with everyone on customers valuing business result or outcome of applied innovation but the issue here again is related to courage. IT service firms core business is system integration, technology integration, consulting on aligning business and technology- IT Service firm’s core business is not necessarily always improving the “customer business” [atleast from a balance sheet perspective]. Firm X (IT Service Firm) may win a large outsourcing contract with a healthcare giant- Firm X cannot set up new hospitals or create a revolutionary way of handling physicians or create cutting edge surgeries or attract patients/payers for that healthcare giant under innovation [that is the core business model for healthcare giant]- Here is what Firm X can do under “innovation”:

• Can definitely innovate on “process” and “technology” as they are experts in that area and they are contracted for that!·
• Can definitely brain storm with the healthcare giant on their areas of business innovation- 5 W’s[Who, What, When, Why, Where] and 1 H [How] should be triggered for Firm X’s involvement in business innovation? Most of the business innovation will have some IT component to it and Firm X can facilitate that IT part for that business innovation and be a part of the healthcare giant’s innovation eco system. This definitely requires “time” and “energy” from the healthcare giant and its not a one-way street. Companies like Walmart, TESCO, P&G have spent enough time with suppliers to enable them in their innovation eco-system so that they can reap benefits.
• Firm X also need to baseline the current state of process and technology innovation [which is a “hygiene factor”] and sign off on the customer expectations and prepare a road map of future expectations with the healthcare giant on innovation. This has to talk about time and energy required from both parties etc. Now without all these, just talking about innovation either with the customer or internally does not make sense and it will join the league of over-abused jargons in management or leadership! We definitely don’t want Scott Adams have “innovation” in the buzzword bingo contest where “Wally” records these from the pointy haired boss!!

I believe the traits required for “value thinking” for a customer is as follows:

1. Keep on reading on the area that you are working- It can be analyst reports, It can be google alerts on your area, It can be books etc. Because at the end of the day, all are inter-connected and the ability of the leader to connect the dots become super critical in an age where there is no information asymmetry. Reading and Connecting the dots is an important trait- For example, hypothetically speaking, this healthcare giant would have created a revolutionary mechanism on pricing with payers on outcomes or would have created a unique way of doing surgery. How do we leverage Firm X internal knowledge or expertise to enable healthcare giant’s business innovation? Can we explore that? It can be a sensitive area but internally we should be able to connect the dots. Can we do an innovation introduction as outlined by “Michael Schrage”: http://blogs.hbr.org/schrage/2010/11/when-your-best-customers-reall.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+harvardbusiness+%28HBR.org%29
2. Have the courage to face failure- Firm X engagement/relationship/delivery folks should go to a customer and propose something new. It can be a failure but the attempt to “challenge the status quo” has to be there in action. It should not be there to give advice to the team- it has to be there in practical demonstration. This is not a enlightenment session where the team should know how to challenge the status quo but it has to be a practical demonstration on how it is done to the team. Most of the times, we tend to have self-doubts about our approach or idea and the whole thing dies before it is presented. I define “courage” as the ability to face criticism from customer or internally and still have the confidence in your idea or approach. At the end of the day, if you present 10 approaches to customer and if 3 are treated as failure, you still emerge at 70% success rate on new things. That requires enormous homework, connecting the dots and courage. As you can see, all are inter-connected.
3. To expand further on courage, we should think of us as tiger in the mirror and not as sheeps- if we think we are sheeps infront of the customer, we will behave like one. This is a direct analogy but it is applicable- What will happen finally? Will the customer eat us? No- we have to create an impression where we are genuinely trying to do the thinking part along with the customer. And whenever you do thinking, you always have the possibility of going wrong- Its okay. Check out a tiger- Even if it makes mistakes, it does not sulk. :-) don’t know whether it is a right analogy but I somehow like the posture of a tiger.
4. Stay Hungry, Stay Foolish- there was an amazing publication called The Whole Earth Catalog. It was created by Stewart Brand in the late 1960's, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and polaroid cameras. It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions. Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s- On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: "Stay Hungry. Stay Foolish." It was their farewell message as they signed off. Stay Hungry. Stay Foolish.

To summarize, the key traits for “value thinking” which is essential for innovation are:

• Read and connect the dots
• Stay Hungry and Stay Foolish
• Have the courage to face failure and challenge the status quo
• Make mistakes as it indicates that we are trying rather than just order-taking
• Always baseline quantitatively and involve the customer genuinely- This helps in showing improvement or progress