I just returned from giving a keynote talk at the Business Process Management Conference. Business Process Management, or “BPM” for short, emerged in the early 1990s as a trend best exemplified by the 1993 book Reengineering the Corporation by Michael Hammer and James Champy. The basic idea sounds like common sense to me: instead of focusing on the structure of your organization–the divisional lines and functional areas–focus on the core processes that create and deliver value (like the order process, supply-chain management). Although “conventional wisdom” has it that BPM was a short-lived fad, in fact the core of the message lives on in widely used management techniques, including six-sigma, and information technology management tools such as ITIL and COBIT.

I worried over my keynote presentation. After all, is innovation a “process”? I think so, and in fact my talk’s title was “the innovation process”. All businesses manage processes of incremental innovation (six sigma might even fall in that category) and new product development (with stage gate approaches). But I don’t think breakthrough innovation can be managed like other business processes. It’s more of an anti-process. By that, I mean breakthrough innovation is not linear; it doesn’t have identifiable stages; the participants and organizational units are unclear. As I say in my book Group Genius, breakthrough innovation is improvisational–it emerges, unpredictably, from a long series of small sparks of ideas. No single one of those ideas determines the final form of the innovation that will later emerge.

Today’s conference at Washington University, called the Innovation Exchange, brought together top scholars and business leaders to think collaboratively about fostering innovation.  It was hosted by our new Institute for Innovation and Growth.  Keynote speakers included:

Bill Peck (former Dean of Washington U. Medical School and founder of Innovate St. Louis)

Carliss Baldwin (Professor at Harvard Business School and an expert in the relations between design and the economy)

Christoph Loch (Professor of Corporate Innovation at INSEAD, possibly the best business school in Europe)

Jeff DeGraff (Dean of Innovation at the Competing Values Company and a professor at University of Michigan)

Key insights that emerged included:

* The need to transform business school education to teach for innovation

* The desire for managers and innovation champions to have a forum where they can exchange problems, issues, and solutions

* The need for managers and staff to be educated about how innovative companies work, and how they can make their own organizations more innovative

Watch this blog in the coming year, as this new Institute for Innovation begins to take shape.

Innovation is the flavor of the month; has been for more than a few months now.  Organizational learning is another management trend–it refers to the ability of an organization to learn–to become more effective over time, to develop new knowledge and retain it to respond to future situations.  What both innovation and learning have in common is adaptability and improvisationality.

In an article in the Fall 2007 issue of Sloan Management Review, Joaquín Alegre and Ricardo Chiva studied organizations high in organizational learning capability (OLC) and identified five core features of high OLC companies: experimentation, risk taking, interaction with the external environment, dialogue and participative decision making.  This is fascinating because in my research, I’ve found that these five characteristics also hold true of organizations that use the power of collaboration to generate innovation.

(1) Experimentation, as defined by these authors, produces a flow of new ideas that challenge the established order.  (2) Risk taking is just what it sounds like: the tolerance for ambiguity and errors.  And as I’ve found, innovative organizations foster idea generation and tolerate failure.

(3) Interaction with the external environment is what I call “collaborating with customers” and is associated with innovative networks that I call collaborative webs in my book Group Genius.  Deborah Ancona, in her 2007 book X-Teams, has likewise discovered that successful teams have an outward focus, and strong social network ties with people outside of their team.

(4) Dialogue and (5) participative decision making are what I call improvisation–a style of communication and an organizational culture that is egalitarian, open to flows across status levels.  Improvisational organizations excel at a type of dialogue that opens up possibilities, a style of conversation in which new and unexpected ideas emerge.

I firmly believe that organizations high in learning ability are more likely to be innovative organizations, and I’m delighted to read of this fascinating study confirming the link.

I was sad to read of the death of Gary Gygax, co-creator (with Dave Arneson) of the legendary role-playing game Dungeons & Dragons.  I was first introduced to the game when I started college at MIT in 1978.  There, I learned that many of my classmates were already seasoned players from their years in high school.  (I guess they were early adopters, considering that D&D had only been published in 1974!)  Although I was never a player myself, in college I was surrounded by the rule books with “Gary Gygax” imprinted on the cover, so I immediately recognized his name atop the obituaries this past week.  If you haven’t heard of the game, you should know that in addition to sales that topped $1 billion, and 20 million players, D&D had a cultural influence far beyond the numbers.

The major national newspapers covered this passing (see articles in WSJ, NYT) .  I’m noting it here because, after a bit of research, I’ve learned that D&D emerged from the same innovation process that I’ve seen everywhere in today’s economy.  Although Gygax certainly deserves to be recognized for his important role, he was not the sole creator of D&D; it emerged from a long series of collaborations, from an almost invisible community of like-minded wargamers.  Innovation always works this way: Even though one person often gets credit for an invention, all innovations emerge from groups.  In Gygax’s case, the group included dedicated wargamers who lived around Lake Geneva in Wisconsin.  Many different Lake Geneva groups came together to play wargames, with names like the Lake Geneva Tactical Studies Association and the Midwest Miltary Simulation Association.  There were so many groups that in 1966, they formed an umbrella organization called the International Federation of Wargamers (IFW), with separate chapters for different periods of military history—the “Castle and Crusade Society” for medieval wargaming, for example, and the “Armored Operations Society” for World War II wargaming.  IFW became nationally known by sponsoring an annual convention of gamers called GenCon, and publishing a magazine of wargaming called The Spartan.

These communities of hobbyists had been experimenting with medieval wargames using miniature figures, just like D&D, for years.  The first published set of rules appeared in 1967—for a game called Siege of Bodenburg, created by Henry Bodenstedt and published in Strategy & Tactics magazine, a wargaming fanzine created in 1966 by Chris Wagner.  (Wagner created his fanzine to compete with the magazine The General, published by the wargame-publishing company called Avalon Hill starting in 1964.)  The wargamers around Lake Geneva read these rules, and a couple of them began experimenting with their own variations.  In 1971, two of them—Jeff Perren and Gary Gygax—published their own set of medieval wargaming rules; they called it Chainmail and sold it through a company called Guidon.  Tolkien’s trilogy, The Lord of the Rings, was gaining a cult following at the time, and sales of Chainmail were surprisingly strong.  A third Lake Geneva wargamer, Dave Arneson, began experimenting with his own variation that he called Blackmoor.  When Arneson and Gygax began collaborating on the next generation of medieval wargame, they took most of Blackmoor’s features intact.  They intentionally named the main characters after those in Tolkien’s trilogy—orcs, ents, hobbits, wizards—to tap into its popularity.  (A lawsuit from Tolkien’s estate later forced the game’s publisher to rename some of these characters.)

I love stories like this one, because they show so clearly how innovation emerges from a collaborative process.  In my book Group Genius, I tell many similar stories—for example, how Monopoly emerged over a 30-year period from a national community of Quakers, frat boys, and economics professors.  Dungeons & Dragons was a collective creation, emerging from an unsung, almost invisible collaborative web.  With the help of Gary Gygax, this emergent phenomenon was disseminated far beyond the Lake Geneva community to become an international phenomenon.  When the International Federation of Wargamers faded from history in 1974, its passing was not noted—there’s no such thing as an obituary page for groups.  So we use the obituary pages to remind ourselves of the true nature of creation by recognizing those individuals who played key roles within genius groups—like Mr. Gygax, who died March 4 at age 69 at his home in Lake Geneva.  It’s all about collaboration; as Gygax himself said in a 2006 interview, “The essence of a role-playing game is that it is a group, cooperative experience.”  Rest in peace.

A long-awaited report on how to measure innovation in the U.S. economy has just been released by the U.S. Commerce Department. The report is called “Innovation Measurement: Tracking the State of Innovation in the 21^st Century Economy”. I first learned about this high-profile initiative last October; a press release revealed that a panel of CEOs and academics had met in Washington DC to discuss how to measure innovation in the U.S. economy. When I say “high profile” I mean folks like Microsoft CEO Steve Ballmer, Medtronic Chairman and CEO Art Collins, IBM CEO Samual Palmisano, and Harvard economist Dale Jorgenson.  The original press release said that the panel’s recommendations would be published in November; perhaps only an innovation junkie like me would be checking every week since then!

To measure the impact of innovation on the economy, analysts often use a measure called Total Factor Productivity (TFP). Any growth in TFP is assumed to result from innovation. Of course, the problem is that productivity could grow for other, non-innovation, reasons (for example, if existing innovations are diffused more broadly, TFP would grow even without new innovations). Other common measures of a country’s innovation have their own problems. You could count up the number of patents; but, patents alone don’t translate into successful innovation. You could count up the number of professionals working in R&D and university research labs; but as with patents, that’s a crude measure that doesn’t directly track successful innovation.

In the end, the panel’s report doesn’t tell us exactly what to do.  Panel member Ashis Arora, Professor of Economics and Public Policy at Carnegie Mellon, said that “The current advisory panel did not opt to recommend an index, because there is no serious evidence on how different measures of innovation should be combined, either at the organizational level or at the aggregate national level.”  However, Commerce Secretary Gutierrez outlined a plan for moving forward: a better measure of the impact of high-tech goods and services (to be developed by the Bureau of Economic Analysis and the Bureau of Labor Statistics); a better way to measure productivity increases that result from innovation investment (to be developed by the BEA); and new data collection efforts to measure the role of basic research (spearheaded by the National Science Foundation).

A longstanding problem has been getting different government agencies to share data with each other.  The stumbling block has always been confidentiality concerns.  Secretary Gutierrez announced his intention to work aggressively with the relevant agencies to try to find a way to share the relevant data while addressing confidentiality concerns.  That’s going to require working with a wide range of agencies including the Office of Management and Budget, the Council of Economic Advisors, the Census Bureau, and the Securities and Exchange Commission.  That’s a pretty tall order, but if that could happen it would result in a much better picture of national innovation.

Quote of the week:

“I don’t think people appreciate how much money, time and good technical research goes into what we do. Sometimes, people think the idea is the thing. I think the idea can be the easy part.” Dr. Darryle Schoepp, of Eli Lilly, in an interview about new drug development quoted in the New York Times (Sunday, February 24, 2008, Business section p. 10).

I spent a few days last week in Oklahoma City, as a keynote speaker for an event sponsored by the Creative Oklahoma initiative. Believe it or not, but Oklahoma is working hard to become known as the “state of creativity” (and they’ve gotten a good start by securing the domain name www.stateofcreativity.com). Like many of my readers, I was at first skeptical; Oklahoma doesn’t typically come to mind in connection with the creative economy. But Oklahoma’s creativity initiative has the backing of top political and business leaders, a rare combination. I met the Governor as well as a substantial number of local business leaders. And both Democrats and Republicans were united behind the initiative.

For about five years now, Oklahoma’s initiative has been guided by Sir Ken Robinson, a leader in the field of creativity and education who has spent most of his life in the U.K. (thus accounting for his knighthood by the Queen) and, seven years ago, attracted to the U.S. by a top position at the Getty Foundation in Los Angeles. No doubt as a result of this expert advise, Oklahoma is doing everything right–the campaign is proceeding on multiple fronts, including education, culture, and business.

I was invited to talk about innovation in the schools of the future. Oklahoma schools have adopted the A+ schools model that originated in North Carolina. If we want a creative economy, then we absolutely have to start with our schools, because the creative economy depends on creative workers. I haven’t written much on this blog about my research on schools and creativity, but let me just say that most schools today do a very poor job of fostering creativity in students. When I see Oklahoma investing in its schools in this way, I begin to believe that it truly could become known as the “state of creativity.”

They’ll have to be in it for the long haul; regional transformations like this historically have taken between ten and twenty years. Another invited speaker was Pascal Cools, of the Flanders District of Creativity project. Flanders is the Flemish region of Belgium, and until a few years ago was thought of as an agrarian backwater. Now it’s a center of the global innovation economy. In the small Belgium town of Leuven, Pascal coordinates a global network of “districts of creativity” that include Qindao, China, Karnatka, India, Catalonia (”in” Spain although the Catalonians would deny that), and yes, Oklahoma–the only state in the U.S. to be a member in this international effort.

I wish Oklahoma great success in this transformative effort.

The annual Booz Allen Hamilton report on the world’s 1000 largest corporate R&D spenders has just been published.  As with previous BAH reports, the surprising finding is that the amount of R&D spending is not correlated with any financial measures of corporate performance.  It’s not how much you spend, it’s how you spend it.  In their analysis, Booz Allen found that the companies that get the most bang for their buck–what they call “high leverage innovators”–are the ones that integrate customers and users deeply in every stage of the innovation process.  These successful innovators involve customers in idea generation, in selecting the best ideas, and in refining and elaborating ideas.

For example, one company they interviewed, Parker Hannifin, reports that they require a lead user to be on every development team.  A second company, DeWitt (maker of professional power tools) has their engineers and marketers spend hours each week at construction job sites.  Once a prototype is ready, they take it straight out into the field, lend the prototype to the workers, and then check back in a week to find out how it worked out.

This finding reflects my own research finding: that companies that build collaborative webs with their customers are the most innovative (see Chapter 10 of my book Group Genius).  As I’ve found, it’s not good enough to simply do market research or focus tests.  Customers have to be deeply involved, participants in the internal conversation.

There’s one finding in the BAH report that conflicts with my own research: after interviewing a smaller subset of the 1000 companies (they don’t say how many, but it’s probably less than 20), they report that all of those companies interviewed used a tightly managed stage-gate process.  At each stage, approval to proceed was based on measurements of a variety of critical factors.  Frankly, to me that sounds like attempts to apply Six Sigma to the innovation process.  These are misguided and almost always kill innovation (see my previous blog posting).  I’d be very surprised if the most innovative companies were all doing this, so I wonder how representative the companies interviewed really are.

Thanks to Booz Allen Hamilton for providing this service each year!

Today I’m sitting at Harvard Business School, participating in what promises to be a seminal conference about creativity and innovation–with business leaders including Kim Malone Scott (Google) and Scott Cook (Intuit), and top scholars like Howard Gardner (Harvard) and Bob Sutton (Stanford).

The session opened this morning with four top business leaders, who were each asked: “What are the most important unresolved questions about creativity and innovation?” The first to speak was Kim Malone Scott, a senior manager at Google who is director of AdSense online sales and operations. Her question: “Can creativity scale?” Creativity is most active in a small collaborating group: the most innovative companies are small startups. But eventually, as the company grows, collaboration becomes bureaucracy. So how can a company keep benefiting from the power of collaboration, even as it grows? At Google, Kim reported a few ways that Google was trying to solve this problem: (1) permission isn’t required to start something, but you have to tell everybody first; (2) avoid ownership, because that creates silos; most businesses at Google do not have a single top manager. No one is the manager of the Internet search business at Google. (3) Redundant projects, and frequent failure, are absolutely necessary.

Next was Diego Rodriguez, head of the Palo Alto office of the legendary design firm IDEO. His key question was: “How can we move from depending on the lone genius, to tapping the power of collaboration?” As successful examples, he provided Proctor & Gamble’s Innocentive idea marketplace; Mozilla’s open source code base; and Threadless, the web site where you can post t-shirt designs and then vote on your favorite designs. He emphasized that collaboration occurs across boundaries, when you don’t know who’s in charge, and when everyone is intrinsically motivated.

Third, Mark Fishman, head of research at the pharmaceutical company Novartis, asked “Can a company be both efficient and innovative?” Efficiency is critical at a pharmaceutical company, when it can take 10 years and $1 billion to develop a single new product.  One comment of his that stood out for me: “Six Sigma kills innovation.”

Finally, Scott Cook, founder of Intuit (the maker of the Quicken software) asked “Do we even need management anymore?” In his analysis, innovation today almost always results from emergent discovery out in the field. At Google and many other innovative companies, the best ideas emerge from employees or customers, not from managers–who often seem to just get in the way of innovation.

All four of these legendary executives seemed to be reading from the book Group Genius, where the message is that creativity is never about a lone genius, but is rather about collaboration and social networks. However, I’d be surprised (although delighted) if any of them had read my book. What’s really going on here is that the idea of “group genius” is broadly out there, in the culture.  This is my argument in the book: that even though I am the author of Group Genius, my book is just one manifestation of a collective revealing of knowledge about the importance of collaboration.

After this panel, the legendary Howard Gardner spoke on the topic of “Creativity and Responsibility”: can you be both creative and responsible?  Later speakers on Friday included Harvard’s Amy Edmondson (on the role of failure in creativity) and Stanford’s Jim March (on adaptability and creativity).

Kudos to the organizing panel, led by Theresa Amabile.  This is a highly significant event.

This last week, I visited the World Intellectual Property Organization (WIPO), a United Nations agency based in Geneva. I was the lead-off speaker of a two-day conference called “Intellectual property and the creative industries.” By “creative industries” they mean money-making ventures based in the creative process: the primary topics of discussion were movies, music, and videogames. There were speakers on the program who represented each of those industries, and the ministers of culture from Lebanon, Jamaica, and Nigeria.

The creative industries make a big impact on the bottom line: in the average OECD country, between 5 and 6 percent of GDP comes from the creative industries. The United States is far ahead of the pack: over 11 percent of U.S. GDP comes from the creative industries. (And we’re just about the only country without a ministry of culture!)

Our stereotype of creative activity is the starving artist, painting in the basement; or the depressed poet, writing somewhere out in the woods. But the forms of creativity that make a big economic impact are complex, organized, and collaborative–think Hollywood movies or major new videogame releases: a single new movie or videogame involves hundreds of people and costs $20 million dollars plus. In spite of the high cost, these investments can pay off big: Halo 3, the new videogame for Microsoft’s XBox, made over $300 million in its first few weeks. The studio music recording industry is also complex and collaborative; it starts with a song, but then enters a multi-staged collaborative process (brilliantly demonstrated at this conference through a documentary video displayed by Ms. Laura Tesoriero, President, EPSA Music, Buenos Aires).

A few things were missing from the conference. Most of the speakers were advocates for rightsholders, and for mechanisms to protect against copying and piracy, such as Digital Rights Management (DRM). But there are strong voices out there arguing for “free culture” and “creative commons”; developing countries who argue that protected pharmaceuticals cost too much and that they are morally justified in producing copies, because they save lives; such voices were not present at this conference, and the result was that it felt like we were all preaching to the choir. When I presented my argument for mandatory licensing and for a cap on licensing fees (you can find it at the end of my book Group Genius), I felt like I was upsetting the consensus–even though I’m a big supporter of intellectual property rights.

A second thing missing was those industries based on patents rather than copyrights; most of the talks clearly assumed the copyright as the model for IP. But many people would argue that software, for example, is a creative industry, and patents are more relevant than copyrights in that industry.

And, finally, those traditionally high status creative activities like painting, poetry, and novel writing were not represented. It’s perhaps to be expected that national governments would focus on the highest-revenue industries. But publishing is not an insignificant business; many books generate millions, and a large number of successful movies are based in novels. And the art world is often the source for new trends in graphic design and packaging. While focusing on the big-money industries, we shouldn’t lose sight of the full range of creative activities–all of them are critical components of culture.

How do you translate a new idea into a profitable innovation? One of the first steps is to get a patent, to make sure that no one else can steal your idea. To receive a patent, you have to show that your idea meets three criteria: it has to be novel; it has to be useful; and it has to be not obvious. It turns out that this notion of “nonobviousness” is very hard to define, and this is a pressing issue among patent lawyers today.

Yesterday and today, I’m a participant in a conference at Lewis and Clark Law School, in Portland, Oregon, where scholars from different backgrounds are trying to work out this complicated notion of nonobviousness. I’m one of 16 scholars; three of us are psychologists who study creativity, and the others are lawyers, economists, and R&D managers at high tech companies (including IBM and Microsoft).

The issue is timely, because in April, 2007, the Supreme Court decided a case about nonobviousness–the first case they’ve taken on this topic since 1966. A company named Teleflex had received a patent for combining two existing patents. The first prior patent was an adjustable gas pedal, so that drivers with short legs could move the pedal forward. The second patent was for an electronic sensor that could detect how far down the driver had pushed the pedal; the sensor would send an electronic message to the carburator, thus getting rid of the wire cable that used to do the job. Teleflex had been granted a patent for an adjustable pedal with an electronic sensor; they had sued another company, KSR, who had later come up with the same combination and was selling the product. KSR argued that the combination was obvious, and therefore that the Teleflex patent should be invalidated.

Every major player in the U.S. economy took sides in the case, because the potential was that the Supreme Court could radically raise the standard for receiving a patent, making life harder for inventors, university technology transfer offices, and small high-tech companies. Larger companies (Microsoft, Cisco), generic drug manufacturers, and open source software advocates hoped that Teleflex’s patent would be overturned, and hoped that the Court would specify a harder-to-meet standard of nonobviousness.

The unanimous, 9-0 decision overturned the patent, on the grounds that the combination was obvious. And this was a hugely important decision, because the Court rejected the standards that the Patent and Trademark Office, and the lower courts, had been using to determine obviousness.

The Court’s decision is complex, and leaves a lot of issues unresolved. But overall, I think the Court made the right decision, because I believe this new decision allows collaborative webs to innovate more smoothly (in the way that I describe in my book, Group Genius). What are your thoughts?