Being fairly curious you search for the fit and its meaning to both parties as Innosight has been continually shaping their offering to focus more on the strategic positioning of innovation over the past few years as the market has been undergoing a significant change in client demands and innovation solutions. I wanted to work through all of what this might mean and some more.

The transaction overview is ” Huron will purchase Innosight Holdings, LLC for $100 million upon closing, consisting of $90 million in cash and $10 million in Huron common stock, plus contingent consideration of up to $35 million if specific financial performance targets are met over a four-year period”

This time last year we saw another acquiring of a pure innovation firm

This time last year we saw the takeover of Fahrenheit 212 by Cap Gemini and I wrote about it here under “In the blink of an eye, it gets something bigger.” I had suggested at the time that “David meets and marries a Goliath” and worried over the deal for Fahrenheit’s future.

Recently I went back and took an updated look and from all accounts the relationship is thriving (on the surface) and the Fahrenheit team seems to be well on track to achieve their stated aim of being a global innovation strategy and design firm  where their stated objectives are “we challenge the belief that innovation is inherently unreliable and have spent the last decade designing the method, building the model, and assembling the minds to make innovation a predictable driver of growth for our clients’ businesses“.

Part of their magic sauce lies in the Applied Innovation Exchange that had been designed and launched by Cap Gemini some weeks before Fahrenheit 212 was acquired. Still taking a fresh look at the underlying changes of that marriage is for another post, let’s return to Innosight’s move of being acquired by Huron.

Back to Innosight.

I consistently look at different innovation consulting firms and the directions they are taking as it makes sense to gauge the directions that client demand is taking. Innosight is one of those first port of calls for me. They have been undertaking some internal moves in recent years, to reflect the changes and challenges around a ‘pure’ focus on innovation and where it fits within the larger organization,  by attempting to move further up into the strategic design and alignment in building greater C-Level engagements, searching for larger project sized contracts.

Innosight has been continually shaping their offering to focus more on the strategic positioning of innovation. They break down their offering into three core parts- 1. Create Growth Strategies that “Strengthen and extend today’s business – while harnessing the disruptive innovations of tomorrow”, 2. Develop Innovation Capabilities of “the talent, culture, and systems to make innovation repeatable and reliable” and 3 Build New Business to “discover opportunities, design new business models, and launch high-impact new ventures.

Understanding the rationale. Working through it.

Innosight is a partnership so it was not so easy to gain the type of understanding you require, relating the aspirations, reality with hard numbers. Well as Huron is on the  NASDAQ (HURN) it becomes a little easier in what they need to declare for this acquisition.

I was a little surprised that Innosight had a turnover of $43 million in 2016, I was expecting more from a team of 90 people. Also how the breakdown of revenue by industry specific their business profile was not as I would have expected. Although these clearly change by the demand of the clients and the recognition that the consultant can deliver the work, compared to others, in a very tough competing environment.

According to the first webcast on this acquisition (17/2), Innosight has 31% of their revenue in Life Sciences and 15% in Healthcare in 2016, so on the surface, they have a 46% ‘fit’ to Huron. The big difference coming in the fact that Huron is servicing around 500 health organizations mostly individual hospitals and academic medical centers, with 400 universities and institutions. Innosight has focused far more on Corporations, one notable one being Aetna. Huron has around 2,000 employees and having present revenues (excluding Innosight) of $726m in 2016. Is it such a fit?

What did surprise me on how the Consumer Products part of Innosight’s business had fallen away from what I can see and that might reflect the growing gap still to be found at ‘appealing’ to the C-Level on strategic innovation and the ongoing need for operational delivery of innovation capabilities and competencies.

These insights show Innosight has been adapting and responding to changing innovation needs and market opportunities as they felt they could work the horizontal, across industry, for many of the innovation capabilities and designs, although it is certainly becoming more complex at strategic design level. Yet this across-industry has been going against the ‘competitive’ grain when you are facing large vertical and horizontal consulting practices that claim they offer both a real depth of industry and innovation-specific knowledge. Often I do question these claims, in what I see, with notable exceptions.

I think it is this positioning as a strategic consulting company, competing in an extremely tough environment with the big strategic consulting companies of McKinsey, BCG, Deloitte, Strategy& and a whole host of full consulting and service solutions where EY, KPMG, and others all compete for a slice of the innovation pie is a very tough one for Innosight to gain the momentum they would have liked.

Equally, at the operational and integration end, we see Cap Gemini, Accenture, TCS and many others offering digital and transformation services. No, a very tough market to compete in and I think for Innosight this must have been a constant ongoing struggle.

Rooting for the specialist.

I will instinctively root for the focused business that has innovation at its core and Innosight has been one of these. Their focus on strengthening and relating growth needs coming from innovation and its necessary alignment was a good but perhaps too niche a position to constrain their growth against such global competition.

The disruptive message they offered, although a powerful one, needs a highly receptive audience and most organizations leave their changes until they are often in the middle of a crisis and then they tend to panic and call in the ‘big guns’ of the consulting world.

Finally, in this section, Innosight’s growth route through innovation was a good position. They focused increasingly on alignment and taking a ‘future back’ approach to eventual strategic design, to determine new innovation business models was a good targetted focus and has been, I suspect, the reason for their compounding 20% yearly growth. Yet I can imagine they were not achieving that critical mass and scale I suspect they wanted, to stay independent and became open to an offer. For some to perhaps ‘cash out’ while others stay for varying reasons.

In the announcement of this acquisition Huron made the following overview:

“When combined, Huron and Innosight will use their strategic, operational and technology capabilities to help clients across multiple industries develop pioneering solutions to address disruption and achieve sustained growth.

“No industry is immune to disruption. Faced with increased competition, often from unconventional sources, organizations are forced to rethink their historical strategies to stay ahead of market forces and changing customer preferences,” said James H. Roth, chief executive officer and president of Huron. “Together, we will provide a full spectrum of services – from strategy to execution – that will help organizations think, plan and act differently to confront disruption and accelerate growth.”

Built by leading strategic thinkers and co-founded by renowned strategy consultant Mark Johnson and Harvard Business School professor and author Clayton Christensen, the world’s foremost authority on disruptive innovation, Innosight is a trusted partner to Fortune 500 companies and other leaders looking to strengthen today’s business while creating tomorrow’s growth engines. The firm’s innovation and transformational strategies have proven successful in industries undergoing disruptive change such as aerospace, automotive, energy, financial services, healthcare, insurance, life sciences and retail.

“Companies are under mounting pressure to satisfy a range of competing interests,” said Scott Anthony, managing partner at Innosight, who will become a Huron managing director. “But shifting stakeholder expectations, combined with disruptive change, create significant opportunities for today’s leaders. Huron and Innosight’s combination of capabilities in strategy, operations, technology, and analytics will enable us to offer transformative change to address these opportunities.”

Formed in 2000, Innosight recognized that traditional approaches to strategy and growth were not enough to help companies accelerate transformational change. This became the basis for its “future back” approach to strategy. Organizations that apply Innosight’s approach build leadership alignment on a vision for the future and create portfolios of new innovations and growth businesses that address changing customer needs and outpace their competitors.

Applying the same methodology alongside Huron’s deep industry expertise in healthcare, education and life sciences, the combined firms will help leaders in these critical industries successfully navigate changing market dynamics, regulations and consumer expectations to grow for the long-term”

“No industry is immune to disruption” Here lies the rub.

I think this disruption thought underscores the joint rationale for this acquisition. Heron is facing some massive forces of disruption in their primary business of Health as well as Education. With a Republican party looking really hard on how it will unwind or redirect the Affordable Care Act (ACA) The comprehensive health care reform law enacted in March 2010 (sometimes known as ACA, PPACA, or “Obamacare”) has given much of the past growth to Huron. Today they are seeing declines in this sector while this uncertainty continues. Clients are downsizing in projects while the political and macro conditions are sorted out.

The same is about to possibly ‘hit’ in Huron’s Higher Educational offerings as the new Administration has signaled large questions of necessary change in the general direction of Education- Presently with all the uncertainties of the new Secretary of Education, Betsy DeVos and the directions she takes in what some are assuming is a radical agenda of change, leaves the higher educational institutions in a potential ‘state of flux’.

As this potential set of policy disruptions will need time to get the level of clarification and granularity clients required, it exposes Huron and 70% plus of its business to many uncertainties.

Arguably, it will be well positioned when these policy decisions become clarified but that is potentially arriving over the next two to even four years between being decided and enacted, into policy and clarity for the individual institutions to react too.

This present operating environment for Huron does make for real uncertainty, especially in larger transformational consulting projects but it needs to manage the interim in different ways. So positioning for disruptive change and managing strategic and operation transitions become essential to help manage this period of great industry uncertainty.

Transformational guidance becomes the key mutual focus.

Innosight has been positioning itself increasingly as a growth strategy consulting firm focused on helping organizations design and create the future, instead of being disrupted by it. As a leading authority on disruptive innovation and strategic transformation, these identifications of new growth opportunities, making changes through new ventures and designing the capabilities to accelerate to significant industry and organizational change. will require a lot of guidance to support organizations as they contend with the change transforming their industries and businesses.

For Innosight does it make any changes with its direction? Open questions perhaps?

Innosight had a global footprint, it seems Huron withdrew from its international business expansion back in 2015. Although Innosight has 80% of its business in the US, will it continue to pursue growth outside?. It has an office in Singapore and one in Switzerland and when you are servicing Global fortune 500 equivalents you need this broader presence. Huron has really a 100% business in North America.

Do they compliment and focus only on the US market or will they stay global in ambition, if the C-Level remains as an essential focus, it stays both a necessity for one (Innosight) and an aspiration for the other (Huron). That will have its integrating challenges perhaps or will they combined have and global appeal in the focus sectors Huron currently serves as very US centric?

Equally, although Innosight has been growing its Healthcare and Life Sciences business the blending of very specific work on operational matters by Huron with Innosight’s C-Level future back work and the search for growth, new business models and launching new ventures needs some radical aligning to leverage well, it needs some dedicated work.

Innosight by spanning more the horizontal position, across industries needs some recalibrating possibly with Hurons’ more vertical depth and very deep operational engagement. Possibly not so easy but a challenge to extract and leverage the complementarities in many ways quickly, or it gets likely to becomes ‘bogged’ down in those past entrenched internal positions that are highly vertically focused.

Will this be a prelude to a new operating structure? Maybe it is the time.

Having this aspiration of Hurons in dealing at C-Level becomes a reality with the leadership team that resides in Innosight and the thought leadership that constantly emerges in the form of innovation thinking, books, and academic work.

Will Clayton Christensen, along with Mark Johnson and Scott Anthony give Huron the entry point into the C-Level and Government Corridors? I’m not sure it the core leadership team of Innosight is staying or cashing out?. That has yet to be fully and specifically clarified. How does that move across the 2,000 seemingly highly industry specific plus consultants, I think will be an equal challenge.

When you also look at the present advisory heavyweights of Academia, advising Innosight in the form of Vijay Govindarajan, Rita McGrath, Hal Gregersen, Jeff Dyer, Clark Gilbert as well as Clay Christensen, along with numerous others that work with Innosight to varying degrees, it should have greater ‘growth’ gravitas.

If the advisors to Innosight stay involved then the potential to gain leading academic insight, to help open corporate C-Level doors and clarify much, has a powerful ‘enabling effect’ that Huron will need to relate too. Hopefully, they, (Huron) are not losing this in the acquisition as it harnesses a really powerful brains trust in my opinion at the right point of organization entry.

I was a little surprised that Huron has 120 plus client-serving Managing Directors.

From what I understand is that Scott Anthony, the present MD of Innosight, will become one of these Managing Directors positioned in the Business Advisory service area. I wonder about this, for positioning around so much uncertainty and potential disruption if this is the right place?

Of course, I don’t have details of any of the Innosight teams new positioning but to transition from a partnership to a (highly) structured consulting firm as Huron seems to convey. The question becomes perhaps one of utilizing talent in the best way not ‘just’ fitting into given structures.

Maybe something more radical will emerge

I would argue with so much ahead in many corporate strategic redesigns, as well as coping with industry disruptions, both in the US and global markets, the scarce resource becomes those that can articulate and energize the set of strategic decisions needed, experienced in disruption and planning out new business models becomes the critical one to nurture and transfer.

That is not easy as it calls for a combination of change management skills and strategic grounding at C-Level ‘speak’. Then you gain the operational outcome ‘flowthrough’ from this and the challenge is harnessing those fairly rare resources both across vertical and horizontal challenges with the strategic dialogues delivered at the right level.

This managing of an internal design change can become the critical enabler and criteria to judge how this acquisition works in identifying, leveraging and harnessing the diverse resources across the ‘disrupting’ landscape ahead.

The existing structure at Huron is a classic consultants – seemingly siloed.

In Hurons recent risk assessment (Form 10-K) it stated on its employees ” the managing directors are the key drivers of the business. They work externally to serve clients as advisors and engagement team leaders, originate revenue by developing new and existing client relationships, and enhance our reputation. Internally they create our intellectual capital and develop our people. Our senior directors, directors and managers manage the day-to-day client relationships and oversee the delivery and quality of our work product.”

I would wonder how the dynamics and flow of a partnership differs in where it places its emphasis, time, management and energy. I feel it will require some adjustments for Innosight to relate into a much larger organization set up more vertically in focus and structured in the traditional lines of a larger consulting practice?

Finally Huron’s headquarters are located in Chicago with domestic and international (?) offices including those located in the following major metropolitan areas: Atlanta, Bangalore, Boston, Buffalo (N.Y.), Dallas, Denver, Detroit, Houston, Madison (Wis.), New York, Pensacola (Fla.), Portland (Ore.), Raleigh (N.C.), San Francisco, Toronto and Washington, D.C. Whereas Innosight is located in Boston (80%) of the team, Switzerland, and Singapore. The domestic US market perspective will clearly dominate, will it become all-dominating? Are we going to see a growing global footprint or a retreat into America?

I think the acquisition does come as a surprise.

I had not, in all honesty, heard of Huron but that is not so surprising because I am not so focused on Health Care, Hospitals and Medical Institutions, or the operational matters they have clearly built a strong business upon, specifically in the United States. So I initially wondered on the attraction between the two. Just simply why?

It boils down to a significant cash consideration for the partnership of Innosight to distribute, partly knowing being independent is a long hard slog. It is equally this growing recognition that “no industry is immune to disruption” including consulting, often working on perhaps outdated consulting models. It is also a crisis of revenue need for Huron, a publically quoted organization recognizing the deteriorating state of the US healthcare market.

There is this increasing realization that greater disruptive forces are coming into play, in the form of even more competitors, increased pressures on margins, a struggle to achieve the bigger projects in uncertain time and the debate on where to focus, vertically or horizontally.

A further choice of  managing all the forces of change domestically in the biggest consulting market of the USA at a significantly changing time politically, or taking out a global footprint further out becomes a real challenge to manage well and keep shareholders happy. Global footprints come at a far higher higher cost to utilization of assets, facing the growing, diverse and challenging consulting market where big seems to be getting bigger and more diverse, offering such scale and access to deep resource to call upon any time. Some tough decisions have to be made here beyond the aspirational.

In summary

Both Huron and Innosight trade on close client relationships once established, a focus on clear reputation, harnessing either industry experience or subject matter knowledge (disruption theory, innovation, business model change) to then deliver to the client’s explicit needs. in potentially more meaningful and focused ways as highly specialized.

Do they achieve a balanced portfolio of services with this deal? Perhaps no, they certainly fill or plug some essential gaps but the ability to really leverage this is the “real ability to straddle“, not just diverse client needs but the one that for me, makes or breaks this, the internal straddling required to integrate and leverage each of the parts into a cohesive whole. It will be interesting to see how this plays out.

The macro and micro forces are in play across all the consulting industry, it is not immune itself. So many questions are being raised on global uncertainties that will impact both the US & global focus for many. Many political and Government decisions will be forcing change but while this stays unclear, for many this is a growing time of uncertainty.  It is the ability to “focus out”, design and determine what are the real disruptive forces each client has to double down upon, will provide options and alternatives to thrive in this age of transformation.

As I said earlier that is a rare ability to harness the strategic patterns and design new innovation business models and this takes a specific skill set, which seems Huron are buying in this acquisition of Innosight. Time will tell on the acquisition success as the internal design of Huron to take advantage of these changing market forces does need further fleshing out. It needs a very different language of (client) design and articulation, I believe.

Hopefully, that clarity comes in the coming days in further investor and webcast calls.

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The post Possibly a Significant Shift in the Innovation Consulting World? first appeared on Building Your Innovation & Ecosystem Intelligence.

Unless this changes it will continue to erode the clients’ confidence in these service providers and they will be seeking increasing internal solutions to tackle their problems. I think if this trend continues it will be a mistaken course.

Consultants are not addressing many of the changes occurring and ignoring opportunities to adapt to different circumstances, they are simply not putting up a strong case of their engagement by redesigning their business models or opening themselves up to different forms of collaboration.

In many ways, the consulting industry specializing in innovation is its own worst enemy.

It is highly fragmented, often highly specialized in certain innovation practices, and much of the advice comes from a cottage industry of independent practitioners, caught up in executing and little time for advancing their own knowledge.

There is this sense that consultants are resolutely staying very internally driven, self-promoting, still trying to convey the story of innovation mastery, when clearly this is lacking in rapidly changing market and technology conditions and due to this staying ahead of the knowledge curve are actually failing the client.

Many consulting firms have spent the last decade trying to make themselves more efficient, going from craftwork to selling one solution as a mass production to many, to yield ever-increasing fees, so as to gain a re-occurring return on a one-off invested solution. Innovation solutions simply need to be crafted to each set of circumstances mostly, in my opinion, and that conflicts with this repeating model.

When clients were pushing down prices it made sense to offer general solutions but the disruptive forces occurring in clients’ markets are requiring far more the return to crafting individual solutions.

Larger Consultants have been offering body shops, and set-piece solutions, to offset client resource shortfalls. This sits less well in a time where demand for unique innovation is required to offset these disruptive forces coming from often unexpected sources.

The two, quality versus quantity of consulting, are difficult to equate coming from the same consulting firm. Bespoke needs to be recognized as necessary for innovative solutions.

The scrabble for consultants is to re-position themselves back at the high-value end but they need a greater depth of knowledge, expertise and experience to convince clients of this need to change differently than simply providing resources. Both clients and consultants are struggling with their own legacy of where resources reside and what value these can provide.

The mismatch of client needs and consultants’ offerings.

The client is increasingly requiring more organic or holistic solutions not a ‘piecemeal’ innovation offerings. These separate pieces often don’t dovetail into one complete innovation system because they are supplied by a variety of different service providers, all having their own ‘pet’ approaches.

Perhaps there is a real mismatch between clients’ needs in aspirations and budgets and the available innovation consultants’ ability to match and relate to specific industry practices and scale to meet client needs.

There also seems this perpetual dilemma of clients’ wishes that are hard to reconcile with operational realities to turn their organizations from being focused on effective and efficient into agile and adaptive, required for innovation.

Often the two are caught in the classic “who does what”, “how much each can and should manage” and the ability to handover or what happens when the consultant finishes the project and leaves, taking a level of knowledge with them that was never given time to reside inside the clients.

Consultants are far too cautious for their own good

Consultant firms, on the other hand, are moving far too cautiously to any form of collaborative form, they tend to bring ‘experts’ in for ad hoc, one-off assignments when they need deeper expertise. Wherever possible consultants want to manage as much as possible internally to ‘keep’ the fees generated inside. This is not a recipe for building lasting relationships that have mutual value in growing understanding.

Often this ‘keep it in-house’ whatever it takes, promotes that in-breed fault and is not reflecting the commonly held view today, “that all knowledge does not reside within its own walls”; they still reluctantly hang on to the closed system of inventing only inside here.

This often manifests itself in the host of variations in what is claimed as their ‘unique’ versions of “common innovation” where they constantly reinvent the wheel in their own approaches to processes, definitions, tools, frameworks, systems of working and idea management etc. I often feel those “unique solutions” are often just simply mutton dressed up as lamb.’

The resultant cost of rework if clients bring in a different consultant grows.

Today I think part of the clients experimenting and learning internally is due to this disappointment with the consultant. Clients are becoming extremely selective for the use of any outside advice. Many clients are simply building their own innovation teams with individuals that have had some given time consulting to offset, defray and strengthen their own in-house capabilities.

The reality is these are often more ‘at odds’ with the business units, seen as elite, out of touch often just pursuing their own agenda, not accountable, and often less supportive of the current business needs.

Also, innovation itself is going through really a massive change.
The need for ecosystems, platforms, the greater use of analytics, big data and reliance on technology are all crowding in on innovation delivery.

The emphasis on thinking through new business models, combining design thinking, lean management, customer development, prototyping, experimenting outside the lab, collaborating with clients, finding different partners, the different exploitation of research techniques are all breaking out in different forms and combinations is radically altering approaches to innovation.

Also collaborating and networking are far more essential to innovation exchange, be this in the early idea forming stages but increasing in the development and execution of innovative solutions. Partnerships are diverse, delivering on the need of the job to be done. Orchestration is increasingly playing its part to manage all the assets and knowledge coming into play.

The innovation consultant can lead or can be simply a bit player in this synchronizing of innovation activities or offering ‘leading’ advice.

I have suggested in past posts that we all need to think differently:

innovation is based on the thinking around the shift from products to solutions, from transactions to growing far more value-adding ongoing relationships, from a supplier of product services, into highly valued network partnerships, exploring innovation across all options, instead of delivering on discrete elements; this requires managing the whole ecosystem of the innovation design differently.

The external innovation consultant needs to change

I get the distinct impression the focus of most innovation consultants is still locked into product innovation or improving the process of the pipeline/portfolio, the idea generation and project execution model. It is not evolving into broader services or accounting for the transformations underway at the clients end.

While the consulting firm stays closed-up, intent on delivering their own solutions,will mean they are often far too busy catching up, lagging in their own emerging practice and due to this ‘lag’ have lost any leadership position in many things relating to innovation.

To overcome this you need to be engaged, to be able to piece together fragments of information to gain the insights that independence can offer. Consultants need to explore and experiment themselves in a laboratory and pilot testing environment, that allows clients to work alongside them to learn and gain from this in collaborative ways. Both learn and both benefit going forward in new ways.

Sadly general well experienced innovation practitioners are actually thin on the ground. You do need to search hard for these but they are available. This exploring and extracting insight requires dedicated experience and constant involvement in broader innovation understanding

Often even the large consulting practices can’t afford to have more than a few experts scanning this innovation terrain yet clients, again and again turn to the broad consulting provider for specialist advice.

The one real change that is occurring is in thought leadership from consultants

Clients often lack real deep insight or draw out the implications of these emerging practices, they want to work more alongside others in experimental practice spaces to truly figure out how to respond to them or understand the implications to their own business. It is only part of the innovation knowledge puzzle for the client.

They need to constantly look elsewhere to piece this together, if at all they can, as so often the reporting loses much of its value as it is not translated into suggested solutions if the consulting industry fails to provide these services or knowledge laboratories.

There is increasing value in the thought leadership pieces emerging from the large, well connected consulting firms. Their ability to extract knowledge from their clients and increasingly match this with merging practice is valuable.

The work of many of the larger consultants in the field of thought leadership, including Deloitte’s, Bains, McKinsey, Booz, PWC, A D Little, PA Consulting and some others, has begun to provide a much greater insight through their access to C-level people and their ability to provide reports on best or emerging practice.

This is helping understand changes occurring and the emerging practices around organizations’ current thinking of innovation, yet it is failing to be fully translated into the client application.

Translating thought leadership to new practice is a real opportunity for all
Presently much of this thought leadership is failing to be translated into practical solutions, they remain research findings.

Thought leadership seems to be increasingly dominating the marketing activities of consulting firms, and with some good cause: clients require evidence and good thought leadership, it does matter to them, to figure out their internal solutions.

I’m not unhappy with that, I’ll be honest, as my competitive space is largely about understanding emergent innovation practice to relate and absorb the findings and then attempt to connect the thinking to improving innovation practice within client thinking at individual, team or organizational level.

I’ve been shifting my business model in the past few years, into a far more advisory one than consultative for clients, attempting to connect the multiple and different dots coming in from multiple sources to help this thinking and understanding.

We come back to the reason why, what used to work before, often doesn’t now.

If the innovation consultant needs to question the changes occurring all around them, then they need to ask “why not develop a different type of sustaining collaborative arrangement?” One where they, the consulting firm have scale and resources, become far more aligned with people like me, who have the entrepreneurial energy and zeal that explores and exploits, probes and connects, offering a further validation path that clients might value.

There is so much convergence, linkage, networking, and integration pieces occurring that none of us can remain islands of specific knowledge, we must find innovative ways to collaborate, to build an ecosystem of knowledge that provides clients a real competitive advantage. I want to participate in far more scaling, proving and validating.

Consultants must learn within themselves to collaborate, exchange and value a greater ‘collective pool’ of innovation knowledge, otherwise, solutions being offered to clients remain incomplete, stilted and lack the real diversity of understanding they require to combat a different set of market conditions than in the past. They need greater transformational services.

Collaboration in the making?

Perhaps we have here a collaboration in the making, that is for the clients (markets) benefit and bridges some of the current client / consulting gaps that I feel are there.

I wonder if the larger consulting company can see beyond their own noses for the value in this?

The post The Challenges Being Faced by Innovation Consultants first appeared on Building Your Innovation & Ecosystem Intelligence.

Packed all within a day there was plenty of material ‘fodder’ to feed off of and learn from.
A really good conference but what quickly followed was a strong dose of that withering on the innovation vine.

I read two consulting surveys on innovation

I’ve been suddenly pulled out of my virtual bubble back into the harsh realities of where innovation really is. Just simply how innovation is struggling and that lies far more at the top of our organizations than below, those below who are simply trying to ‘get on with the job’ but with at least one hand (or even two) tied behind their backs.

I have been reading two sets of observations, one from Fahrenheit 212, the other from Innosight and my mood began to change. I’m suddenly back in reality where we have this huge gap between those ‘working’ innovation and those at the top simply not engaging with innovation or still failing to understand it or even failing to connect the dots.

A growing gap at the top in what they need to do to make the connections both inside and outside the organization to manage the changing landscape. One that still suggests we have this consistent failure to align the strategic and innovation activities and provide a more balanced orientation in the mapping to different horizon thinking that is needed. It seems perspectives are totally out of whack.

The Fahrenheit 212 Post on their recent observations left me perplexed.

Firstly Fahrenheit 212 asked 100 chief innovation officers a set of questions around their getting their innovation projects to market. They claim that forty-five percent of respondents said fewer than 10 percent of their projects make it to market.

Fahrenheit claim that was an “eye-opener for understanding the challenges that innovation practitioners have,” where Fahrenheit was suggesting 60 to 70 percent of incremental innovations should be the success rate.

As this view came through the Washington Post under “Corporate attempts at innovation are overwhelmingly dying on the vine” I was not able to view the actual results directly or more of the thinking that went into this and can’t find any further reference on this on their website besides a Facebook entry. I’d like too.

Why? – well surely there are significant differences between projects being managed or piloted at the CINO level than passing through the organization as supportive and incremental? Yet until I can understand the context of these ‘statements’ it is hard to judge this piece of information and its real importance, presently it lies as a “oh yeah”.

As a starting point what is judged as an innovation project from the CINO’s perspective versus the everyday innovation occurring. Are these numbers so “eye opening”?

The whole position and value of the CINO is certainly up for grabs and in a ‘forming’ stage. One really good point made as a quote by Jon Crawford-Phillips, a partner at Fahrenheit 212 was this: “The primary value of the chief innovation officer is the connectivity between the company’s growth strategy and the decisions and focus of the senior leadership team and the translation of that into an innovation agenda”.

Crawford-Phillips was recommending corporations don’t align innovation with their financial interests and suggested establishing this. He comments: “There’s a strategic way in which they allocate resources to core innovation, and there’s clear metrics around the performance of core innovation and a clear understanding of the financial impact of that innovation on the company’s balance sheet.”

I struggle with what I should be getting out of this ‘report’ as Fahrenheit 212’s suggestions because if they are determining clear metrics in core innovation performance and a clear understanding of the financial impact on the balance sheet then it is no surprise innovation practitioners have difficulties in getting initiatives and projects through organizations. Can projects that are in themselves innovative be measured on the same metrics as established known ones?

The comments reported from the survey leave more questions than answers and has this set of observations really helped ‘advance’ innovation? Maybe more will emerge. It seems to fit perhaps with their Money and Magic message.

On the other hand, Innosight and their Strategic Readiness Survey really is the actual eye opener.

Innosight offers an executive briefing on their “Strategic Readiness and Disruptive Change” and this survey throws up some serious worries for me.
The report prompts deeper thinking on how organizations are really having difficulties in transforming themselves with all the disruptive change going on around us all. A real eye opener.

Innosight’s summary provides a good snapshot of the issues:

“Disruptive change is accelerating, driven by the rapid emergence of new technologies, the blurring of lines between industries, and competition from both traditional and non-traditional players. As a result, corporate lifespans are shrinking”.

“How does the shifting landscape affect enterprise strategy and corporate innovation efforts? To see how organizations assess their ability to anticipate and respond to disruptive change, we (Innosight) recently surveyed more than 800 executives across 20 industries. The results shed new light onto the challenges and opportunities that leaders face in crafting strategies to steer their companies in both the near and long term”.
Top-level findings included:

• Fully 85% of respondents say their organizations need to transform in response to disruptive change – yet only 49% say that feel very confident or confident that their organizations are prepared for transformation in 3 to 5 years. That number drops to 42% in a time frame of 5 to 10 years.
• Large companies face an even greater “strategy confidence gap.” 83% of respondents from companies with over $1 billion in revenue agreed with the need to transform, and only 36% say they are confident to do so in a 5 to 10 year time frame.

The confidence gap suggests that organizations lack both the long-term orientation and the tools to plot long-term strategy. The survey bore this out:

• Only 12% of organizations have a formal growth strategy with at least a 5+ year time horizon.
• The remaining 88% either have no formal growth strategy or it is shorter term.

This short-term bias has implications for the ability of companies to develop disruptive or transformational innovations—the kind that open new markets and attract new customers—and which typically require a longer-term perspective.”

What a difference a well-structured survey and report can make.

I would recommend taking the time out to read this report. It signals much of what is so wrong at present in the sacrifice of the future, even the eventual existence of the organization in years to come.

This report seems to reflect a broader trend that this frightening “strategic confidence gap” is a huge one, where senior executives are seemingly being increasingly caught up in the short-term demands.

They seem to have scarce time to re-equip themselves, let alone their organization, for the changing landscape and are simply ‘kicking the bottle down the road’ and taking the pay packet that goes with short-term performance. Surely this has to change? Is it so bad?

This report is indicating it is really bad.

I liked the heading to each part of the executive briefing from Innosight as they do summarize the challenges that need to be faced and resolved.

• The Confidence Gap: The Desire – But Not the Ability – to Transform
• A struggle to Keep Pace : A Sense of Falling Behind the Market
• Strategy Shortfall: Growth Plans Focus on Near-Term
• Process Shortcomings Undermine Long-term Planning
• Technology and Changing Consumer Preferences Expected to Be Most Disruptive
• No Lack of Ideas, But Difficulty Getting Through Innovation’s “First Mile”

The last heading is a clear nod to the topic being explored in a new book. Recently Scott Anthony , Innosight’s managing partner, wrote a book “The First Mile: A Launch Manual for Getting Great Ideas into the Market”.

That first mile—where an innovation moves from an idea on paper to the market—is often plagued by failure, in fact, less than one percent of ideas launched by big companies end up having real impact. The ideas aren’t the problem. It’s the process.

Gaining value from consultants’ insights if it enters the public domain

We should get solid value out of research or insights from any consulting research if it is published. So two of our leading innovation consulting companies, Innosight and Fahrenheit 212 approach knowledge sharing in different ways.

Innosight provides a good depth in their report, although it is perhaps light on final takeaways and conclusions, whereas Fahrenheit 212 reported comments are just, well, simply ‘light’ and lacking the depth I would expect from them. At least their survey should link into their own report. This I simply can’t find.

I finally reflected on what makes good thought-leadership from consulting practices

Take a look at this from http://www.sourceforconsulting.com/whitespace/

What makes good thought leadership?

“The clients of consulting firms are inundated with information and analysis from every direction. Unquestionably, the vast majority are binned or deleted instantly”. So what are the factors likely to attract attention,  Sourceforconsulting.com suggest the following:

• Differentiation – will the potential reader pick up and begin to read this piece of thought-leadership? (If it is actually available even!)
• Appeal – does the writing style and presentation encourage the reader to keep on reading past the introduction and beyond? Where do they go from this?
• Resilience – will the reader feel confident in what they are being told? Whether a client buys into the idea a consulting firm is trying to put across depends on the evidence.
• Prompting action – ( I kept all the guidance within this section in, as it is relevant to the two reports I have focused upon) Will the reader do something because they have read this report?

Good thought leadership takes the reader beyond the ‘that’s interesting’ stage – it gives them the tools and inspiration to identify issues in their own organization or to begin to address a pressing concern.

We ask whether the next steps for the reader are clear. We also check that the material isn’t a poorly disguised sales pitch which would undermine its credibility and chances of prompting action.

A tale of two both working in innovation consulting.

Two innovation consulting firms offering up their insights and I feel the one from Innosight is simply much further down the thought- leadership path, in its linkage of its practice and report around disruptive change. It ‘calls for’ and ‘prompts’ action.

Perhaps Fahrenheit 212’s report should have been rooted far more in what it does, that is identifying, developing, designing and implementing profitable new products and services and then framing this within their survey remarks, as this is the space they play in and by all accounts play well. It would have made better sense to me.

I think we all need to think about why innovation might be withering on the vine. We all need to ensure the contributions we make, into conferences, summarizing reports, writing blog posts or being engaged in innovation activities, as consultants or practitioners.

We need to ensure that we do not lose sight that innovation is still struggling to make headway in the ways it should, with the appropriate messages getting delivered effectively and sometimes we all often miss that ‘line of sight’ on that.

Any thoughts on the observations from the reports or what they contribute into our thinking around innovation?

The post I wonder who is withering on the innovation vine? first appeared on Building Your Innovation & Ecosystem Intelligence.

The study makes for fascinating reading and answers a number of questions I’ve been recently having.

Let me expand on this:

One: there is increasingly less time available within the mid to large consultants to train, research and development for their services so as to differentiate themselves in innovation, in what is actually becoming even more of a crowded market.

Focusing on maximising utilization and containing overheads and costs leaves less time to think and develop.

Two: equally the cumulative experiences of clients in dealing with consultants, especially through the practice of more central procurement, has added more pressure on consultants not to provide added extra or to take more radical approaches to innovative solutions for the risk of being compared badly, not offering clear returns and then screened out of the bidding process.
These trends are pushing it seems more incremental innovation in my opinion, but to overcome the concern that the often provided ‘one-size’ fits all that clients seemingly are wary of, what is increasingly happening is having more joint initiatives between clients and consultants. This gives the client more control- in my opinion where it should always be– and gives the consultant the potential for reducing overheads.
So it seems innovation consulting is being managed through some constraining issues. My concern here is it can limit the potential that external advice can contribute and  so it can fall short on stretching thinking around innovation that might actually, limit the final result the client is looking for out of their innovation activity.

The study was conducted in the UK

In the UK there has been an excellent study looking specifically at consulting and innovation, published in October 2011 entitled “Management innovation in the UK consulting industry”, by Dr. Joe O’Mahoney, a Fellow at the Advanced Institute of Management and a Lecturer at Cardiff University and commissioned with the Institute of Consulting.

The aim of the report is to stimulate consultancies to be more innovative and therefore add more value to their clients. For me, this is an objective I would really welcome looking around at all the ‘safety first’ approaches going on in this area in many consultants, big and small.
The report can be viewed here: http://bit.ly/tQdeld

I’m sure many points are equally applicable to innovation consulting globally.

For some time I’ve been puzzled on where the bigger innovation consulting projects have gone and this report points to one logical reason. The main conclusion in the study was: “more sophisticated clients, the need to share costs, higher utilisation levels and the increasing role of procurement mean that innovation tends to be client-specific, shared and based around improvements rather than large-scale, industry-wide innovations.”

Some of my initial reactions from reading this study raise real concerns

It seems the increasing internal ‘invented here’ approach has been at the expense of seeking the external contribution and the belief that tailoring innovation to meet unique needs is more prelevent. Is this actually good?

Are there other constraining factors at play here? Are clients simply reinventing the wheel, actually spending less efficiently?

I would also suggest external advice is being used ‘selectively’ as it is more lagging advice and not leading advice as in most cases of consulting. I get the impression within innovation advice that this client-consulting relationship is actually being constrained. Let me explain.

I would argue from reading this study we are seemingly downsizing collaborative innovation between clients and consultants, restricting the potential for pushing out innovation.  The consultancies as restricting their innovation practices and don’t make the type of investments that would help advance thinking?

If I am right then we are actually constraining innovation. Consultants are possibly behind the game and are learning from emerging practices within the client and can only then provide limited support. Consultants are seemingly not providing “thought leadership” just reporting on best practices and what they are learning from this to apply it elsewhere.

So consultants are reduced to supporting subsidiary roles. That is a pity if this is the case.

Identifying constraints and applying imaginative solutions

This report helps identify the constraints to current models and allows some excellent insight for others to think through and see if they want to explore the potential and seize a different value proposition by restructuring differently around the depth of their innovative services and ‘jump ahead’ in the innovation learning curve.

There are plenty of imaginative ways to do this restructuring that can continue to contain costs in the early stages that fit with these economic uncertain times and then apply the ‘gas’ as the recognition and value can be seen by present-day reluctant clients.

I would argue many clients are actually desperately seeking a more robust set of innovation activities to get more growth back into their businesses and good external advice can shorten the learning curve considerably if this is recognized as such.

The perceived issue: a chain is no stronger than its weakest link.

For me these constraints have some potential opportunity. I focus 100% of my time on formulating the innovation path in different ways. I do honestly struggle to attract the bigger clients as they often tend to look for certain big consulting brands to give them that certain ‘security’ and if something then goes wrong they can always claim in defence of their decision, “well X consulting co” recommended this approach.

Often the selection process is one of the constraining dynamics smaller service providers have to work hard to overcome and balance. Expertise and outcomes have to be seen and valued for the potential to justify delivering ‘great value’ from any work done very much more upfront.

Specialists like me, can and do invest far more in focused innovation knowledge. I see this in many areas where specialisation can really score if the client ‘sees the value but there though, is often the rub, getting them to ‘see it’ and ‘engage’ early enough is difficult particularly if you go through a central procurement procedure.

It becomes often an onerous route when you have limited resources to go through the selection process, often not getting into meaningful discussions with the person charged with implementing the solutions.

Also within innovation, much of the emerging work simply has rawer edges to it as the innovation itself needs to be explored. Clients want to push innovation ‘out’ and achieve real competitive advantage but are reluctant to do this through the smaller, less-known consultant, they look for the ‘reputation tag’ yet the bigger consultants are failing to invest in leading edge thinking, offering a ‘catch 22’ situation.

I would always argue if any innovation is managed thoughtfully and piloted well in its introduction the ‘risk’ is no different than thousands of other decisions made within organizations on new adoption of technology, changes in processes or launching new products, actually much less.

Also smaller advisory firms can be far more personal and collaborative in far greater, more flexible ways, and often at lower costs. Just don’t expect them to underpin those internal weaknesses often encountered with hordes of young consultants that implement the solution and then leave and the association with innovation leaves with them!

Smaller firms usually want to be there at the implementation outcome but in different ways than the bigger guys, looking more to be judged on the results and sharing in the ‘vested’ outcome, as they are wanting a far more lasting relationship built on good value, commitment and trust, a valued advisor.

Certainly, some of the conclusions from this report I have drawn out have some potential opportunities but also provide much cold comfort for innovations future, as it does seem to be constrained if these findings are right. In some ways it offers a bleak future for innovation consulting unless things change.

Some key findings in the study

I think pictures tell a thousand words, in this case four tables from the report.

I really feel the ‘modifications to existing practices’ serves up much of the same, with the costs spread out across multiple clients is not great consulting practice.

Equally  tapping into existing other practices for making ‘changes to internal processes’ utilizes Six Sigma, BPR and other consulting practices but this is not innovation. Innovation is hanging on the coat tails of other pactices, more often around efficency and effectiveness.

Also relying on conducting (often) COO surveys to provide often the ‘thought leadership’ leaves a lot of room for improvement from what I have been reading where many leading consultants do not underpinning suggestions or observations with solutions. The client leads, consultants follow, it seems in what I take from this table.

For me, selecting innovation consulting is not so much in the way they differentiate but in what they can clearly deliver in-depth of understanding, which comes more in demonstrating this knowledge and excellence.

Thankfully this table has the two as the most important but I’d suggest demonstrating knowledge leads to differentiating when it comes to innovation, or should. Demonstrating knowledge leads, differentiation comes out of this.

Also with a centralised procurement, at many of the clients that seemingly hampers according to the report, are playing an increasing role in the final decision of which ‘bid’ to accept.

I really wonder how procurement officers can assess results for managing innovation, as much of the standard critera is on assessing  the returns on investment.

Innovation is far more long term, sometimes speculative and tougher to quantify.  This must cause problems for wanting to ‘push out’ on bigger innovation with consultants for those responsible, arguing for more imagination (and risk) around greater disruptive thinking and business models yet struggling to provide procurement the result criteria to validate this?

If you have clients taking ‘minimal risks’ and you have a lack of time to think about ways to innovate you are certainly in a constrained market.

Then add in clients (lack of) budgets for innovation and low demand for services it really adds up to a grim picture of seeing how you can lift the innovation consultants lot from just providing incremental support in my opinion.

I also think I’ve got some answers to this but those are more for my opportunities to offer a ‘decent’ alternative if wanted!

So seeing that the constraints are increasing over time in this table is worrying for me. Without the client demand for going beyond present more incremental and collaborative innovation, except for sharing joint initiatives that are sometimes likely to be mutually exclusive, the consultant has no real incentive to ‘invest’ in expertise and break out of this cycle.

A lack of ‘bench strength’ of innovation specialists, a reluctance due to uncertainty and consulting in innovation (often intangible and not solution specific without serious work) the consultant industry is reluctant to make deeper investments really concerns me.

To finish on the foreword may seem a strange place but the right one.

The Institute of Consulting council chair, Judy Craske, offers in her foreword the challenges that need to be addressed as innovation consulting will remain constrained unless it makes some radical changes based on changing economic conditions.

She remarks: “As international, national and even local economies change and react to markets in turmoil; our clients’ outlooks reflect these changes, often defensively. Consultancies need to identify and respond to these factors, and then modify their responses to fit their clients’ changing needs and expectations. Developing creative capital within the industry will remain essential”.

She goes on to state: “Whether lone practitioners or multi-disciplinary practices, consultants need to become more innovative and adaptive in their proposals, methods and solutions, while traditional client/consultant boundaries need to be challenged, stretched and even broken”.

Her most important point from my perspective was the following: “Consultancies may also need to be more open to partnership working with other agencies, such as academia or even competitors if they are to respond effectively to the pressures of the current high-cost, low-resource business environment”.

This point on collaboration is for me the most potentially potent- if only larger consultants learnt to collaborate more with others within the provision of ‘services’ – it not only spreads costs, allows for greater potential for fresh thinking but brings into play a richer ecosystem platform of innovation advice to offer clients and that is where we should be heading I feel.

I certainly drew out a lot from this study, by Dr Joe O’Mahoney.

There is much to ponder from my own business perspective deriving from this study and I feel it does gives us all involved in providing consulting or  advisory services some real food for thought involved on providing innovation services differently.

Innovation does needs to advance, consultants can help in this. I believe this can be far more than it is as at present and perhaps the CEO who consistently laments about his innovation performance might raise the game by reducing one of the constraints perhaps holding innovation back and reflect on this constrained client-consulting relationship around innovation.

For all their sins, consultants and advisors should be really rich sources of external advice on innovation but it needs greater investment and recognition of the mutual value and potential to break into this current relationship. This report lifts the lid well for reflecting on the challenges and offers some sound advice to move forward.

One big issue for me is “should the current client/ consultant consulting model for innovation services change for these tougher times?” I for one, believe it should be changed- not just for personal reasons but I believe you cannot ignore any ‘unturned stone’ when it comes to wanting to manage innovation well in such volatile times where innovating successfully has plenty of uncertainly but still really does hold out the promise for a better future.

It does seem both consultants and clients are acting defensively, it’s a little the opposite of what you would expect in ‘pushing’ for innovation in leading practices and many clients and markets desperately seeking growth.

This growth does come from pushing at the edges not staying in the comfort zone.

The Copyright for this report is with the Chartered Management Institute ©. All rights reserved. Except for the quotation of short passages (and in this case selected tables) for the purposes of criticism and review has been granted.

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