Jim Collins has decided to start telling people how to manage innovation.  In "How Might We Emphasize Cost Effective Evaluation Tools" at the Good.is Blog Collins lays out his prescription for managing innovation.  And it's pure Collins, because he's a lot more interested in focus than results.  In fact, he is more concerned that before attempting innovation companies put in place a review process to rapidly cut off funds for innovations that go awry than figuring out how to behave differently.

Jim Collins has decided to tell people how to innovate.  Only his first recommendations don't sound anything like the road to innovation.  His five rules are timely, efficient, focused, sharable and actionable.  There's no mention of getting market input, or figuring out how to behave differently.  In Collins' world if you are efficient, mindful of the clock, focused and committed to extending your past Success Formula he's sure profits will evolve.

His passion for evaluation is paramount.  He loves to talk about being efficient in innovation, prototyping toward some goal that is pre-set.  Being "efficient" about the exercise drives his discussion – as if markets are efficient, or understanding how to make money in a shifted future marketplace is an efficient process.  And he is obsessed with being vigilant.  Collins is fearful that people will waste money on their innovation exercises.  Efficiency, ala Taylor and scientific management, is a dogma Collins cannot escape.  He wants his followers to be efficient, pre-planned, and obsessed about making sure money is not wasted from this escapade into innovation.

Jim Collins' prescription for success is one of the biggest snake oil
sales in business history.  His book sales, and speaker fees,
demonstrate what a big PR budget from an aggressive publisher can
accomplish with content that sounds like "common sense."  Jim Collins'
"great" companies are anything but.  Just run the list and you'll find
he loved companies like Circuit City, Fannie Mae, Wells Fargo and
Phillip Morris.  Companies that failed at innovation and ended up
smaller and less profitable (or gone completely.)

Today's economy has shifted. While Collins and Hamel spent years looking backward to see what worked in the 1970s, 80s and 90s those analyses are of no value today.  We aren't in an industrial economy any longer where building economies of scale or entry barriers works.  Being good at something is the mantra Collins lives upon, but when the market can shift in months, weeks or days to something entirely different being good at something that's obsolete does not create high rates of return. 

Collins is so afraid that companies will over-invest in something new he would rather kill an innovation than possibly spend too much.  His obsession with efficiency indicates an approach that is bankrupt intellectually, and has demonstrated it cannot produce better returns.  It sounds so good to be very focused, to be fearful of pouring good money after bad.  But reality is that businesses regularly accomplish just that – making bad investments – by trying to defend & extend a business that is no longer competitive.

Only participating in changing markets creates high returns.  No business, not even huge companies like GM, Chrysler or Sun Microsystems, can "direct" a market.  There are no entry barriers in a globally connected digital economy.  If companies aren't willing to abandon their BHAGs (Big Hairy Audacious Goals) in favor of creating new solutions they simply are made obsolete.  Nobody's "hedgehog concept" will save them when the market shifts and previous sources of value are simply no longer valuable (just ask newspaper publishers, who never imagined that customers would move so fast to the web instead of waiting for their daily paper.) 

Almost 100 years ago a little known economist named Schumpeter said that value was created by introducing new solutions.  His work demonstrated that pursuing optimization led to lower rates of return, not higher.  As a result, he concluded that those who are flexible to market shifts – bringing new solutions to market rapidly – end up the big winners.  As we look at companies today, comparing Google, Apple, Cisco and Nike to GM, Kraft, Sara Lee and AT&T we can see that Schumpeter had it right. 

The gurus of business management helped us all realize how you could make improvements via optimization.  Peters told us to seek out excellence,  Hamel and Prahalad encouraged us to understand our core capabilities and leverage them.  Collins drummed into us that we should focus.  And most recently, a New Yorker editor with no business training or experience at all, Malcolm Gladwell, has admonished us to practice, practice, practice.  Yet, when we really look at performance we see that these practices make organizations more brittle, and subject to competitive attacks from those who would change the markets.

We know today that innovation leads to higher rates of return than optimization of old strategies.  But few recognize that innovation must be tied to market inputs.  We build organizations that are designed to execute what we did last year – not move toward what is needed next year.  This can be changed.  But first, we have to eliminate the innovation killers — and that includes Jim Collins.