Interview – Graham Ericksen on real innovation

This issue we sat down to talk with Graham Ericksen, Director of Strategy and Innovation at Modus Associates and director of Modus Labs, our new think-tank and weapons lab for the Internet arms race.

Most people think innovation means something breathtakingly new and different, when in fact it’s frequently common sense.

Graham has spent the last 12 years thinking, writing and teaching about digital innovation, and helping companies like Disney, American Express, Fidelity, Schwab and ADP to creatively grow their businesses online.

We asked him what patterns he sees that most reliably lead to success online, and the barriers that most commonly get in the way. Here’s what we learned:

Q: Let’s get straight to the point, Graham. How do you define innovation?

It’s pretty straightforward in my opinion. Successful innovation is change that addresses the real needs of customers, and also leads to measurable business improvement. Being new, different or creative isn’t good enough. It has to meet these two criteria to be successful.

Most people think innovation means something breathtakingly new and different, when in fact it’s frequently common sense. Take Southwest Airlines and JetBlue in the airline industry. They simply decided to treat their customers well, and tell them the truth. It’s a shame that this constitutes revolution in any industry, but the point is it worked and worked well.

Fortune 500 financial services firm USAA is another example. While most firms hammer away every year at call center costs, USAA employees field over 55 million phone calls per year, and as a policy the company doesn’t time them. USAA sees customer service as a multiplier and not a cost center, and this exceptional approach has made them one of the most successful firms in their industry.

When you see companies innovating in ways that you don’t easily understand, that they won’t or can’t explain, or that don’t make them money, that’s when it’s time to be skeptical. Think Enron and Countrywide Financial. Or more recently (dare I say it?), Twitter and Groupon. The jury is still out on those two.

Q: What is your favorite innovation story of all time?

My favorite story is really more of a legend. When Steve Jobs rejoined Apple in the 1990s, he walked the halls with an IBM ThinkPad, and used it as his personal computer. When asked why, he said he was using the ThinkPad until Apple made something better. A year or so later, the first generation of Apple’s iconic silver laptop launched.

Whether this actually happened or not, I can’t say. But I think it’s a great story of how one person forced an organization to innovate in order to improve the business, and create a better product for customers.

Q: What’s the best example of innovation you’ve ever been involved with? Why?

I love this question, because my answer is a great example of how simple changes can lead to breakthrough innovations. Years ago, I was working with a leading 401(k) plan provider who wanted to encourage people to save more in their retirement accounts. The company kept referring to the money taken from paychecks and placed into a 401(k) as a “payroll deduction.” It was pointed out that nobody wants a “deduction” from their paycheck, and suggested that they change the language to “retirement contribution.”

Changing those two simple words funded a lot of retirement accounts, and quickly became the industry standard. It was a great reminder that big innovations online don’t have to be expensive, complex or even involve technology.

Q: What are the most common barriers you see to successful web innovation?

The most common barriers usually involve starting with technology. Either jumping on the bandwagon of the latest hyped technology before evaluating whether it’s a good fit. Or investing in expensive software as a magic bullet, then finding out you still have many of the same problems, plus a host of new ones. For example, we meet with many firms that buy SharePoint or IBM WebSphere as their employee intranet, and only then try to figure out how to make it useful for their organization.

Q: What approaches seem to work best?

In our experience it’s good old-fashioned business fundamentals: Clear business and brand objectives, rooted in a sound understanding of your customers and marketplace. When it comes to the web, business fundamentals are still frequently thrown out the window; usually in the name of moving quickly.

Q: Are there leadership qualities you’ve seen that make for better innovators?

This one can be tricky, and many good books have been written on the subject, but we do see patterns. Successful ego suppression is a big one. The best innovators we’ve seen keep their personal needs, prejudices and impulses out of the picture and base their decisions on objective market data like customer actions and preferences. I’m not saying they don’t follow their intuition, but that intuition is always informed by the data.

Related to this and equally important is the ability to let others contribute ideas and help shape them. The best leaders aren’t the sole source of wisdom in their group or organization. Instead, they create an environment where great ideas emerge from everywhere within the organization, and can then be seen through to fruition.

Q: What advice would you give to business leaders to help them innovate more successfully in the future?

Stop trying to predict the future, because none of us can. What you can do is understand the real demands of today’s customers and marketplace, and address them better than anybody else does. Keep doing that year after year and you will win. It sounds awfully pat, which is why it’s so often overlooked in favor of sexier and more “creative” approaches to business innovation. But this is what we’ve seen work over and over again. Everything else is gambling.