The Fundamentals of Innovation

"We are by nature a very innovative species," says Rob Shelton. The drive for innovation is so deeply embedded in the species that "we probably would be best called 'homo innovatus.' " But there are brilliant and dark sides to the trait, and smart companies must learn the difference in order to thrive.

Shelton, the co-author of "Making Innovation Work" and director of the consultancy PRTM, shared his thoughts on the fundamentals of innovation and set the tone and the framework for the second and final day of the GreenBiz Innovation Forum in San Francisco.

The day's program covered How Innovation Happens, the Power of Disruptive Upstarts and the Future of Innovation.

Shelton's insights included:

Innovation seldom ceases by itself, it has to be abandoned.

That humans have innovation "genetically, deeply in our species ... is the light that gives us hope, but there is a dark side," Shelton said. Once innovation starts in a company, new ideas blossom. The downside is that the innovations generated "never seem to stop on their own," he said. "They just keep going and going, and that means some things go on far past the point it makes sense to invest in them."

Knowing when to stop is important, so is developing judgment. Every new idea isn't a great one, and a good idea may well be a good idea, but it might not be a good idea for your company.

"The biggest problem in companies is not too few ideas, but too many ideas and too few great ideas -- many of them are mediocre," said Shelton. "Here's the paradox: To be an innovative company, you have to have the robust capability and desire to create some really great things, and then not do some of them."

How you innovate determines what you innovate.

"Innovation is a path process," Shelton said. "Innovation is not a one-size-fits-all process. You will get innovation from the pieces you put together and how you use them."

Understanding the difference between incremental innovation and breakthrough innovation is essential.

"Incremental innovation is working around what you know already -- making something faster, cheaper, better," Shelton said. "Constantly improving those (qualities) is excellent. It is important, but let me contrast that to breakthrough innovations.

"They are the game-changers. They are catalytic. They are expansive. They are breathtaking and they need special handling. They are not built around what you know. They push out beyond that, beyond terra firma. Breakthrough innovation is terra incognito. You need ignorance management for breakthrough innovation. You need to know what you don't know, and then you try things and see what works. Incremental innovation is to breakthrough innovation as hugging the shore is to sailing the open ocean."

Innovation is a team sport built around partnerships.

Collaborative efforts provide the paths to success. Smart companies create "ecosystems of your own operations around the world as well as partnerships all around the world" that foster innovation, said Shelton.

"The concept of the lone genius is by and large not true," he said. "It is the teams that make innovation successful. And the speed and the quality of innovation are significantly improved because of the teams. There are hundreds of IQ points and years of experience that can serve you outside your organization. The broader and more robust the ecosystem, the better the results."

There are places where innovation can occur much better than others.

Nike+ is a great example of "innovation with benefits," said Shelton. Nike's online brand platform for runners tapped the power of social media to serve customers, fuel innovation and build market share.

"It was the intermingling of the inside out and the outside in," he said, noting that the company's market share went up 10 points and marketing costs went down 17 percent as a result.

Pace matters and prototyping is important (the latter being a recurring theme in the conference)

"Speed is critical," Shelton said, pointing to the development of the Dyson vacuum cleaner as an example: 5,721 prototypes of the appliance were built in four years.

Paraphrasing Nobel laureate in physics Enrico Fermi, Shelton said, "When you build a prototype, you test a hypothesis. When results do not fit the hypothesis, this leads to discovery."

Summing up, Shelton said, to innovate:

• "You need vision with metrics and motivators to define what is in bounds and what is out of bounds.
• "You need a process that is designed to reach your goal. Your first innovation may not be a product or service but a process.
• "You need to harvest the best ideas and leave the rest. Discretion is important."

Photos by Goodwin Ogbuehi, http://flickr.com/photos/yoshikatsu.