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Issue 5 – November 2, 2012
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Take the Innovation Self-Test ……………………………………...………….. Holly G Green Innovation is Fun! …………...……………….……………...……….………….…. Nicolas Bry What Next? ………………………………………………..…………..…..……… Rowan Gibson Why I Still Think Microsoft Will Win with Windows 8 ………..……………..…. Greg Satell Cleaning Your Open Innovation House ………...…………..………………… Braden Kelley New 6Ps of Radical Innovation for Large Companies – Perspective . Kevin McFarthing How to Survive Your Innovation Project …..…….…............................…. Gijs van Wulfen Innovation Renaissance Combines Art and Science ………………...…….. Paul Hobcraft Innovation and Organizational Savviness ……………………….…………..….. Drew Boyd Booz & Company 2012 Global Innovation Study ………………………… Barry Jaruzelski
Your hosts, Braden Kelley, Julie Anixter and Rowan Gibson, are innovation writers, speakers and strategic advisors to many of the world’s leading companies.
“Our mission is to help you achieve innovation excellence inside your own organization by making innovation resources, answers, and best practices accessible for the greater good.”
Cover Image credit: soft-drink from Bigstock
Take the Innovation Self-Test
Posted on October 31, 2012 by Holly G Green
Ever wonder why some companies seem to effortlessly come out with one great innovation after another while others struggle to get even one new product or service out the door? There’s a reason for it.
Innovation is a complex process that involves a lot more than just throwing money at an R&D department and hoping for results. Specifically, it requires certain ways of thinking and behaving that open people up to considering possibilities and prevent them from getting stuck in the past.
Companies that innovate on a regular basis practice these behaviors on a regular basis. Companies that struggle to innovate rarely engage in these behaviors, or not at all. Then they tend to blame their lack of success on outside factors rather than what is (or is not) happening within the organization.
To find out where you stand on a continuum of these behaviors, answer the following questions.
In our company:
1. New ideas are… A. Encouraged B. Tolerated C. Frowned upon D. Discouraged
2. Risk taking is… A. Encouraged B. Tolerated C. Frowned upon D. Discouraged
3. Challenging the status quo is… A. Encouraged B. Tolerated C. Frowned upon D. Discouraged
4. Expressing conflicting points of view is… A. Encouraged B. Tolerated C. Frowned upon D. Discouraged
5. Failure is… A. Accepted as a necessary part of the innovation process B. Tolerated C. Blamed on outside circumstances D. Punished
6. Seeking out new sources of data (especially those outside our business or industry) is… A. Encouraged B. Tolerated C. Frowned upon D. Discouraged
7. Interdepartmental communication… A. Happens most of the time B. Happens some of the time C. Rarely happens D. Never happens
8. Collaborating with customers, suppliers, and other stakeholders on new ways of doing business… A. Happens most of the time B. Happens some of the time C. Rarely happens D. Never happens
9. New projects and initiatives… A. Almost always receive sufficient funding and resources B. Sometimes receive sufficient funding and resources C. Rarely receive sufficient funding and resources D. Never receive sufficient funding and resources
10. People are recognized and rewarded for coming up with new ideas/innovative thinking… A. Most of the time B. Some of the time C. Rarely D. Never
Give yourself 3 points for every A answer, 2 points for every B, 1 point for every C, and 0 points for every D. Then visualize a straight-line continuum with zero anchoring the left side and 30 on the right.
How did you score?
25 or more Congratulations, you’re in the innovation zone. You have a solid foundation in place for ongoing innovation, and most of the attitudes and structures needed to support it. This doesn’t mean that you’ll succeed every time. But you should succeed enough to keep you ahead of the competition and develop a reputation as an innovation leader. Senior managers should focus on continually nurturing that culture so that innovation remains an expectation rather than a “nice to have.”
15 to 24 You’re in the improvement zone. You may have the occasional success but probably struggle to sustain innovation over time. Leaders should identify which people, processes, systems, and behaviors support innovation and which ones get in the way. Then create a plan for improving the problem areas, and focus on tweaking the culture so it will allow innovation to flourish.
14 or less Danger zone! Your customers and markets are probably already leaving you behind. Leaders need to ask some hard questions: Why is innovation not a part of our long-term strategy? What is preventing us from innovating? How can we shift the culture from one of focusing exclusively on protecting past successes to becoming open to new possibilities?
Keep in mind that innovation needs to be a long-term process, especially if you’re used to reacting to change rather than creating it. It also requires a culture that approaches it as a way of life rather than a short-term band-aid for current business problems.
So don’t expect to radically change your ability to innovate overnight. Instead, identify where you stand on the innovation continuum, then set small, achievable goals for gradually moving from the left to the right. Get everyone involved in thinking about how to improve the business, and make it safe for people to push the envelope. Over time, you’ll become the company that has everyone else in the industry wondering how you do it.
Call to action: For a REAL eye-opener, have leaders and front-line employees answer these questions, and then compare their answers.
image credit: sapphire
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Holly is the CEO of THE HUMAN FACTOR, Inc. (www.TheHumanFactor.biz) and is a highly sought after and acclaimed speaker, business consultant, and author. Her unique approach to creating strategic agility, helping others go slow to go fast, will change your thinking.
Innovation is Fun!
Posted on October 31, 2012 by Nicolas Bry
An optimistic path
As innovators, our life is regularly facing the “Jumping Hurdles and Closing Gates on Innovation” described by Paul Hobcraft (@Paul4innovating).
From idea to execution, innovation has many places to lose its way. Vijay Govindarajan describes it sharply in his “From idea to execution” (2005, Dec) article: the “innovative project will be clashing with the existing organization at multiple levels, long after the idea generation stage”.
One points out the lack of innovation culture as a frequent shortcoming, for example in functions such as purchasing and legal department which are from the fuzzy front-end process innovation implies. Consuming time and burning energy in bureaucratic tasks and formal contract, which sound logical in mainstream operations, have often no meaning for early-stage innovation, and can smoothly kill creative desire.
But innovation is an “optimistic path”! It involves “focusing on the levers that we can operate” observes Professor Philippe Gabilliet (@gabilliet). So let’s leave the obstacles in the rear-view mirror, and share some aspects that makes innovation such a great activity.
Firstly is the domain of bespoke creation: innovation is not a manufacturing process where a specific set of input and operations will lead to an invariant output.
Each innovation project is specific. Moreover, shaping the new product identity is the main challenge: it involves figuring out a “reason why”, crafting a value-added concept, capturing the meaning for the user, focusing on the key impacts which will create an awsome customer experience, pointing a compelling direction, raising a personal belief, a mix of intuition and rationale that will last along the way, and refuel our energy to handle the project.
In this creative stage, where we look for someting proeminently desirable vs feasible and viable, I feel excited when I succeed in concentrating meaning, focus, and belief in a simple metaphor that everyone can share: a “filter” for our Social TV component, a “share/like button” for the Social Culture component, a “blended TV screen” symbolizing our belief in openess for the Smart TV design.
If belief and metaphor are a common basis to build on the team identity, and facilitating a common language, streamlining knowledge circulation, one has still to form a team to deliver.
Assembling a team, recruiting skilled profiles, T-shaped professionals able to ‘bring their expertise and collaborate across disciplines with experts from other areas’, making new fruitful relationship, sharing the “reason why” and the innovation direction, ensuring perpetual knowledge circulation are management tasks that greatly complement the previous conceptual phase.
Each member of the team has both to commit to the innovation direction, and develop his own course within the project: “It makes sense, but does it make sense for me?” Self-motivation will lead team member to develop his autonomy and reveal himself. “An organization where people serve their goal” as Gary Hamel expresses it, is precisely what I’m aiming at.
Cohesion and consistency, knowledge circulation, harmony are the guiding principles to face the obstacles together, aligned as a rugby team, making the whole more than the sum of the parts, and sail the boat to the finish.
You kow you have succeeded when team members start spontaneously sharing views in meeting, out of their traditional role’s boundary. Last time I saw this was when everyone was excited to discuss about the logo of our social TV component, engineers not being the last involved!
Heading innovation teams from concept to elegant realization along progressive iterations, managing cross functional talents, discovering surprising and amazing design solutions, eliminating the unnecessary, and crafting an environment of trust, an ecosystem favourable the team, turn innovation leadership in a very pleasurable experience.
Customer is king
Getting market feedback, seeing the impact, getting the return loop is the last mile of the journey, and the most difficult in my context.
Most often, I pass the innovation I design to business units that will ensure marketing and sales: therefore, if we measure the product experience, it’s often not our role to assess the overall customer experience, nor to optimize the service design, stressing some ‘Boom’ or ‘Wow’ moments in the customer life cycle.
It’s also not so easy to get feedback from the operationl forces: when it works, you usually don’t hear from them anymore… until the next release. So when we get great feedback from our partenring business units, it’s time for real celebration!
Considering product design, the role of the end-user has deeply enriched: with user oriented design, and then cocreation, passive input from the user is evolving to a more active collaborative design. Customer is transforming from a passive user to an active co-designer.
It is all the more true in our digital industry: the loop ‘from technology to user’ has become reverse, ‘from user to technology’, when user is acting as a software developer, or contributes to the value of the service by generating content for social media or by using a search engine.
Harnessing collective intelligence is what requests innovation adventure. Modern digital platforms enable us to enlarge the team for ideation and innovation contest, switching from monologue to dialogue with user, offering customer an opportunity to act as a partner.
By activating the intelligence of many, openess allows innovation to blaze new trails, and make a very different impact.Keeping a child’s heart, eyes wide with wonder, ready to be surprised, taking full account of unexpected options, is my driver to share the joy, and jump the hurdles of the innovation course.
image credits: hoed.com.au, irishrugby.ie, boom-wow-blogs.forrester.com, eyeglasses-calgary-optometrists.com
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Nicolas is a senior VP at Orange Innovation Group. Forward thinker, he created international digital BU, with a focus on interactive, social and smart TV. He graduated from Supélec and HEC Business School, completing a thesis on “Rapid Innovation” which he implemented successfully at Orange through “component innovation” path. He blogs at nbry.wordpress.com and tweets @nicobry
Posted on October 27, 2012 by Rowan Gibson
It’s not just a good question. It’s THE question. Think about the sheer speed of change in the external world. Think about the intensity of global competition. Think about the bargaining power of today’s customers. Then think about your company. How much of your business model has remained essentially unchanged for, say, five years or more? When was the last time you fundamentally overhauled your competitive strategy? How fast are you currently renewing your products and services?
In a world where what you do now can quickly lose its value and become irrelevant, the issue is increasingly what you do next. What makes or breaks you in the new Innovation Economy is whether you’re capable of continually rethinking and reinventing your company – and your industry – as fast as the world is changing around you.
Thinking about “What next?” is a difficult challenge. Most of us are having a hard enough struggle trying to keep up with “What now?” Here’s why: in the time it took you to read those two sentences, somebody – somewhere on this planet – added some new bit of change to the world of business. Sure, that contribution could be just a ripple on the ocean. But it could also turn into a tsunami.
To illustrate the point: MySpace went from 0 to 100 million users in just 3 years. In 2000, nobody had heard of podcasting. Today, there are more podcasts worldwide than radio stations, and circulation is growing at 20% per month. In fact, there are ten times more podcasts available online than DVD titles. Or consider Blogs. They were nowhere a decade ago. Now there are well over 60 million Blogs online, and 75,000 new Blogs are created every single day (that’s about one a second). Many companies are already using these new forms of media – social networking sites, podcasts and Blogs – to reach out to customers and attract new talent. That’s how fast things are changing. You blink and you miss it.
The message here is that you can’t stand still in world that is moving at light speed. As the pace of change and of business accelerates, the pace at which you develop foresight about industry evolution, about incipient trends and about new technologies – and the pace at which you invent new products, services, strategies and business models – must accelerate accordingly. There is no option B.
Look around the world today and we see entire industries whose business models have gone belly up. Is it because the companies in those industries didn’t see change coming, or is it because they chose to ignore it? In many cases, managers sit in denial for years and wait for their companies to go through a near-death experience before they wake up to the need for rethinking their core business strategy.
Ask yourself: is our organization already committing enough energy to innovation and strategic renewal? Will we be overtaken by what’s next or will we create it? Could our senior executive team clearly articulate the three to four strategic ways in which we intend to reinvent our company and our industry over the next few years?
Organizations typically devote most of their energy to improving what they are already doing, rather than to learning about the future and creating what’s next. Whenever this happens, a company is living on borrowed time.
What we need to do is siphon away some of the time, effort and bandwidth that usually go into execution, and reallocate it to understanding deep change and to generating new ideas and opportunities for growth. We need to put learning, creativity, and innovation at the top of the business agenda.
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Rowan Gibson is widely recognized as one of the world’s leading experts on enterprise innovation. He is co-author of the bestseller Innovation to the Core and a much in-demand public speaker around the globe. On Twitter he is @RowanGibson.
Why I Still Think Microsoft Will Win with Windows 8
Posted on November 2, 2012 by Greg Satell
Way back in February, I wrote that Windows 8 will put Microsoft back on top. Many people thought I was nuts. Nobody could touch Apple and Google’s Android had too big of a head start. Microsoft was toast and anybody who denied it was just ignoring the obvious.
Well, Microsoft launched Windows 8 last week to mixed reviews. None were glowing, a few were negative and almost all expressed some kind of reservation. So how do I feel now? I’m doubling down.
Given that Windows 8 is an almost completely reimagined product, from the interface to the basic technology, the reviews are surprisingly positive. Combined with the rest of Microsoft’s assets, is strategically brilliant (and amazingly interoperable). From a business perspective this is one of the most important products in history. Here’s why:
Microsoft rose to power as the king of the desktop. Controlling the operating system for 95% of the world’s computers, they in large part ruled the tech world. So much so, that they were hit with an antitrust suit to curb their enormous power. However, the world has changed and now Windows runs on less than 50% of connected devices.
Rather than try to defend a bad position, Microsoft has organized its new operating system around mobile. Tellingly, much of the criticism of Windows 8 is about the frustration that desktop users will feel. This is the kind of bold, ruthless move that built the company we learned to both hate and depend on.
Notably, it is a move that Apple still hasn’t had the guts to attempt. Their laptops and desktops run OS X, while iPhones and iPads run iOS, which are both perfectly good operating systems, but the experience between the two is not always as seamless as it could or should be. (For instance, it kills me that I can’t watch HBO GO on my Apple TV).
Whatever the charms of Google and Apple (and they have many), neither has attempted the kind of fearless, shoot for the moon move that Microsoft has just pulled off. Ballmer and company should be commended for not only their vision, but for executing it well.
Microsoft’s Continued Dominance in Productivity
Despite what many think, Windows isn’t Microsoft’s biggest or most profitable business. In fact it ranks third on both counts.
The most profitable division by far is the Business Division (largely made up of the Office software suite), which accounts for more than half of Microsoft’s earnings, followed by “Servers and Tools” that provides back end software for many large enterprises.
As tablets become more important in the workplace, Office will be a major mobile asset for Microsoft. It is the one remaining area where Microsoft retains its monopoly and, though often overlooked in tech circles, programs like Word and PowerPoint are absolutely essential for business people.
And getting Office software to work on iPad is a nightmare. This is a major oversight on Apple’s part. The iPad is great as a media device, but for productivity it leaves a lot to be desired. That has left a large opening for Microsoft and it looks like they are walking right through.
The Subtle Genius of Surface
Of all of the aspects of the Windows 8 strategy, the Surface tablet is probably the most brilliant strategically. On the face of it, they are introducing a business-based tablet that is a logical successor to the net book: All the computing power that you need for daily use as well as a touch interface and a keyboard.
However, look a little bit more closely and there are a few nuances that make the Surface a really smart move. First, Android has a much weaker position in tablets than in phones and therefore are not nearly as invested in Android there. Second, tablets have a much greater need to run Microsoft Office software than smartphones do.
Most of all, Microsoft will pay no penalty for manufacturing their own hardware. Apple is already fully integrated with respect to hardware and software and Google, with their purchase of Motorola, is heading that way. So however much manufacturers might protest the crossing of this particular line, Microsoft is the best friend that they have.
So we should see the Surface tablet for what it is, a virtual guarantee that manufacturers will support Windows 8 for tablet computing. The product itself can live or die, but the business is almost sure to thrive.
The New Digital Battlefield
As I’ve written before, while social and mobile have driven technology for the past few years, the new digital battlefield is at home, in the car and in-store. Microsoft thrives in both of these areas.
Their Xbox platform, with tens of millions of subscribers, is miles ahead of Apple TV and Google TV in terms of consumer base and seem to be winning the race to ink up cable deals. They’ve also been successful with their smart car initiative, which includes Ford Sync, Kia Uvo and Fiat Blue & Me. Google and Apple aren’t even active in the category.
Perhaps not surprisingly, Microsoft is also way ahead in retail solutions and have built a joint retail innovation lab with Razorfish, the digital agency. Again, neither Apple nor Google has any offering to speak of in this area.
So while the fact that Windows is the first operating system to unify mobile and the desktop onto one platform, through SkyDrive and SmartGlass it will also unify your TV and (possibly) your car and your shopping experience onto one voice, touch and motion interface. That’s bold and impressive.
While I don’t think anyone would argue that Microsoft has always been the world’s greatest technology company, they have consistently been a great technology business. No other enterprise has been so successful for so long through so many technological cycles.
When the rise of the Internet threatened their business, they turned on a dime and met the threat. Now that mobile has imperiled it again, they have again reacted with vision, competence and good business sense. While their franchise will never be as hip as Apple’s or as technologically forward as Google’s, they manage to get the job done.
For all of the nit picking, one thing everybody agrees on is that Windows 8 offers good user experience and interoperability across a variety of platforms while improving basic performance. That’s quite an achievement by any standard. If it were easy, certainly somebody else would have done it by now.
As much as I’ve become invested in the Apple ecosystem over the past few years, I have a feeling that, as my business computing continues to entwine itself with my personal computing and entertainment, I’m going to become increasingly ingrained in Microsoft’s.
image credit: microsoft.com
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Greg Satell a consultant who concentrates on media, marketing and innovation. Check out at his site, Digital Tonto and follow him on twitter @digitaltonto
Cleaning Your Open Innovation House
Posted on October 28, 2012 by Innovation Excellence
Interview – Navin Kunde, Ph.D. – The Clorox Company
I had the opportunity to interview Navin Kunde, Partnerships Manager for The Clorox Company, about open innovation strategy, importance of an innovation culture, and .
Here is the text from the interview:
1. Do you feel that companies need an innovation strategy? If so, where does open innovation fit in?
Yes, every business needs an innovation strategy, but this must be aligned with corporate and business-unit strategy. Open innovation complements what the company can do (or chooses to do) internally.
2. Why is it important for organizations to consider participating in open innovation or why did your organization begin its open innovation effort?
Clorox started on the OI journey over a decade ago with supplier win-balancing partnerships, where we awarded long-term contracts to innovative suppliers to help “pay” for the “commercialize-able” innovation they brought to us. We were able to tap into innovation in our supply base by doing this.
3. What should an organization be aware of if they decide to pursue open innovation?
Internal willingness to do OI is as important as the ability to do OI, so you need to work on both.
4. Which companies do you look to as leaders in open innovation?
Eli Lilly, P&G, HP Labs, Nestle
5. What is the most important culture change for organizations to make in order to support innovation?
One must be sensitive to Intellectual Property considerations when doing Open Innovation, because it requires sharing your plans and strategies with innovation partners.
6. What are some of the biggest barriers to innovation that you’ve seen in organizations?
Internal resistance usually stems from a fear that going open will reduce the need for or reliance on internal resources, and from skepticism about how good the external world is
7. What skills do you believe that managers need to acquire to succeed in an innovation-led organization?
The ability to pinpoint which part of the company has a need for OI, coupled with the ability to overcome internal resistance to OI.
8. If you were to change one thing about our educational system to better prepare students to contribute in the innovation workforce of tomorrow, what would it be?
Learning how to build a business case that takes into account economic/business needs and consumer/market needs in addition to technology/product needs would be very helpful
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Braden Kelley is a popular innovation speaker, embeds innovation across the organization with innovation training, and builds B2B pull marketing strategies that drive increased revenue, visibility and inbound sales leads. He is currently advising an early-stage fashion startup making jewelry for your hair and is the author of Stoking Your Innovation Bonfire from John Wiley & Sons. He tweets from @innovate.
The New 6Ps of Radical Innovation for Large Companies – Perspective
Posted on October 30, 2012 by Kevin McFarthing
How do large companies pursue radical innovation? You know, the kind of new product that changes or creates a market. In my last blog I summarized the 6Ps, a template that I believe could help to increase the output of game-changing innovation.
The first “P” is PERSPECTIVE. Businesses tend to lose perspective when they allow the urgent to squeeze out the important, when they really need to address both. Of course this quarter’s sales targets need to be delivered, but the future of the company depends on new opportunities to drive growth; that is what is built into most stock valuations.
Few large companies today are vulnerable to “wipeout” disruption. They are either more broadly based in their product or service offering; or they compete in industries that are relatively stable, for example consumer goods. Of course there are sectors that are more volatile, like mobile phones, but I would suggest that for most large companies, the best perspective on radical innovation is how to recognize external threats that could disrupt your business; and to work on opportunities that could do the same to others.
When it comes to tools to help retain perspective, I really like the Three Horizons model. Baghai, Coley and White first outlined this in “The Alchemy of Growth” in 1999. It helps to map out a perspective of markets and technology in the self-explanatory diagram below (from Tim Kastelle’s excellent blog). Paul Hobcraft has also written well on the Three Horizon principles.
The Three Horizons process forces an assessment of technology strengths and market dynamics. It then forces a view of how much resource is allocated to each of the Three Horizons. The example above shows Google’s allocation of 70/20/10, which will differ for different companies in each category. It also forces a portfolio approach to innovation.
It also helps to retain the concept of emergent strategy in your approach to the innovation portfolio, as the days of fixed long term planning are diminishing, as outlined by Karl Moore. You can’t just write a five-year plan, lock it down and expect it to deliver. Large companies must continually revise their perspective of the role radical innovation will play in their growth.
The balance of the projects and resource applied to each element of the portfolio should be decided by the top team in the company, and be dictated by corporate strategy. Incidentally, it’s not just the resource that should follow a strategic allocation; the use of management time should also follow the Horizon split. Too often resource is applied to the opportunities on the edge, but thinking time is taken up by the short term. It should be followed through, and the temptation to reallocate Horizon Three resource to fight Horizon One fires should be resisted.
In that context it is also important to match what you say with what you do. If your strategic intent and associated communication places a high priority on radical innovation, but you don’t apply the quantum of resource with matched competency, you won’t deliver. You need a good perspective on the skills, competency and technology needed. And of course, if you don’t have it inside, find it in the outside world through Open Innovation. Kraft Foods (in their previous manifestation) estimated that 98% of IP in the food industry existed outside Kraft. Such statistics help to put the potential of Open Innovation into context.
It also doesn’t follow that radical opportunities take longer. Yes, some do if they need complicated and time-consuming technology development. However the breakthrough of digital photography was driven more from a existing consumer need and rapid acceptance of the solution; the technology had been available for some time before it started to take off in the market place.
There are many other tools to drive a broader perspective of opportunities for innovation, Three Horizons is just one. Whichever approach you take, the messages are:
- Make space in your portfolio for bets on radical innovation;
- Balance your portfolio over different timeframes;
- Balance your portfolio over different technology needs;
- Exploit the potential offered by Open Innovation;
- Balance your portfolio over different market opportunities;
- In all cases, stretch your view and take a broader perspective.
In this way, a stretched perspective can increase the chances of large companies delivering radical innovation. In the next blog I’ll discuss how the potential of radical innovation can be assessed.
image credit: constructionmktg
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Kevin McFarthing runs the Innovation Fixer consultancy, helping companies to improve the output and efficiency of their innovation, and to implement Open Innovation. He spent 17 years with Reckitt Benckiser in innovation leadership positions, and also has experience in life sciences.
How to Survive your Innovation Project?
Posted on October 27, 2012 by Gijs van Wulfen
“We need something really new to grow sales again”. This is on the agenda of management teams all over the world. So as one of the best innovators you were asked to come up with new ideas. And so you do. You present them creatively with beautiful designed mood boards and even a customer journey movie.
Everybody is enthusiastic and you get compliments on your creativity. But nothing happens. Management focuses again on the urgent daily business. And after a short while all wonderful creative ideas dropped dead on the floor. And you and the other innovators within the organization are really frustrated.
Three things went wrong:
Management did not know what to expect. They asked for innovation but were surprised when they saw the creative ideas. Dogs bark at what they don’t know. And people are sometimes just like dogs: they first bark and then think.
It was not yet clear “what’s in it for us?” The new ideas looked great but the business side (sales and profit potential) was not worked out indepth in the first ideas.
Relevant questions on feasibility were unanswered in full extent. Can we make it? What will it cost? Will customers buy it?
Often the most difficult part of innovation is not the external side dealing with customers. No, your biggest worry is how to survive your innovation project internally. Most organizations that really need to innovate have a risk adverse culture. And you can’t change this overnight. So managing innovation has everything to do with managing expectations and reducing risks.
Seven practical tips on how to survive your innovation project:
Start with a concrete innovation assignment. This assignment gives direction and manages expectations of top management. You can download a free checklist on how to make an innovation assignment.
Make it a team effort. When every discipline is involved from the start in your innovation team you get a ’360 degree’ view on things and the new concepts get a lot of fathers and mothers with a much better chance to survive internally.
Use the customers perspective. Make sure your innovation project is relevant for customers. One of the main reasons innovation is difficult, is that your potential users should change their behavior. They will have to look for -, buy – and use your innovation. And why should they? That’s the question! So identify relevant problems at target groups first and then ideate solutions that will solve them later.
Make business cases. You can only present an idea for the first time, once! So when you have the chance to present it, be aware that a new idea is not only ‘a creative product’. It also must comply to regular business criteria too. Here’s a format for a mini new business case in seven slides.
Connect Top Management. ”Innovation ist Chefsache”, say the Germans. That’s why you should involve ‘the boss’ from the start. Not in a steering committee on a distance. Invite Top Managers as team members and take them with you on your innovation journey. In this way they can get new insights themselves.
Connect Customers. Involve customers from the start in every phase of your innovation project. Lead users in consumer markets and cocreation partners in business markets are perfect advocates internally to prove there’s a potential market.
Do it fast. On average an innovation project takes 18 months for new services and 36 months for a new product. Be sure to speed it up. You know when there’s a takeover, a strategy change or another crises your innovation project will be at risk. So focus and deliver as fast as you can. You can jump start innovation with a structured innovation expedition called FORTH. Download the map.
Managing Innovation is managing paradoxes. Think outside the box and present inside the box. Be innovative and act conservative to reduce risk. Be fast and precise.
I wish you a lot of success surviving your innovation project. Please share with us your own tips how to survive innovation projects.
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Gijs van Wulfen leads ideation processes and is the founder of the FORTH innovation method. He is the author of Creating Innovative Products & Services, published by Gower.
Innovation Renaissance Combines Art and Science
Posted on October 27, 2012 by Paul Hobcraft
I’ve often heard and read different views that innovation is either an ‘art’ or a ‘science’; yet we either ignore the value of combining them or we simply struggle to make the connections to achieve this. Why is that? I’d like to explore this “combination effect”.
I used the above in this paragraph suggesting we need to harness the potential in innovation combinations far more:
“The art of innovation needs to be broken out of the science that needs to be applied, and then knowing its entire component parts then recombined in sustaining, thoughtful ways. We do need to harness the energy of innovation and we are not yet fully achieving that”.
So why does art and science combining have great potential?
Let’s begin at the beginning when art and science were one
The development about the preparation and properties of different materials went hand-in-hand with the development of the art of painting, pottery, metal-working in the 19th Century. Jonathan Ashley-Smith in his paper “Science and Art: Separated by a Common Language” does a far more extensive job of reflecting on this period but this is my ‘potted’ summary.
This was the time of the ‘renaissance man’ where you sought out knowledge on the latest scientific discovery or the ones on art or exploration. We wanted to combine our knowledge. The 19th century was the time of wondrous discoveries; they needed to be pursued by all enquiring minds. A universal polymath.
It was later in that century we began to separate more than integrate. This specialization became fashionable. Schools, universities began to separate art and science to make it extremely difficult to study both simultaneously. Science became governed by organization and rules, art allowed freedom of expression and to act more intuitively and the separation continued to be reinforced well into the 20th century.
Science demonstrated truths, observable facts, was systematically classified and projected out that trustworthy view to us that discovering new truth (or new innovation) was clearly in this domain, we needed to strengthen this, we as society needed to reinforce it. Art became intensely personal, reflecting the ideas of the originator and the interpreter; it was not the same irreversible force that science was becoming, for forging new paths, for generating wealth, health, new industries leading to prosperity. Art began to take the back seat. We have had to wait until design became fashionable to ‘allow’ it back into the business, less at arms length, late in this last century and more integrated in this one.
Specialisation was established in both the art and science field and over time became ‘culturally’ separated. We made choices on which served our needs and business clearly chose science. We all could have mutual comprehension and appreciation, that was understood but the two
sides were separated even further. This remained throughout the 20 th century although each side grappled and often wanted to embrace the other, it struggled to find the real means to re-combine and achieve this, with some notable exceptions.
Art and Science are the book ends for innovation
I was reading an article about the great disconnects between Art and Science by Kristi Charish, and I loved the way she explained her thoughts, in particular: “art leads to scientific innovation and science inspires art. Like a pair of book ends they work best in tandem and change the way we view the world. Without one you can’t have the other and there is a lot to celebrate in that!”
So have we fast-forwarded so much?
I think we still see art and science operating in different worlds, in different compartments and they often don’t combine as we would like. Yet she is right, they do prop up innovation but we do need to stop using them as the ‘book ends’ and bring them into the middle to combine more and more until they are ‘fused’ as one. The very best, the breakthrough, the new discoveries happen when we combine in today’s world.
It is these ‘emerging’ fusion points of art, design, engineering, and science coming together and coalescing that are giving us great innovation. Art and design provide innovation with analogies and compelling stories, alternative structures, inspiring techniques, challenging methods and knowledge to push our boundaries and our minds. It inspires us to then often push science, technology and engineering more and more to translate this. Just think of architecture of great buildings, pushing the boundaries of function and design with availability or the technology and design of the iPad or iPhone that pushed those boundaries of the accepted, and changed the norm for measuring the future.
Divergence and convergence
I use this divergence and convergence approach an awful lot. We build far too much on convergence without exploring divergence as much as we should. We promote convergence so we can execute things efficiently, effectively and as quickly as we can, we are rewarded by what we have completed. Yet the ‘art’ of divergence plays an equal role. John Maeda of the Rhode Island School of Design offered a good take on differences that make sound sense to me. Let me explain this in my way, partly borrowing.
Artists and designers are firstly divergent thinkers and make many uncomfortable, those often schooled in business and facts, that are impatient with achieving results but always from expected tangible positions. We struggle with intangibles or theory. Artists and designers expand our horizons of possibilities and can make us ‘connect’ far more, if we are prepared to let go and ‘see’ alternatives.
It is this melding of divergence of designers and artists combining with our convergences of science and engineering that allow us to ‘find’ often that exceptional innovation that has combined all the disciplines or parts. Art and design can give us less constraint and this provides often the vision for the factual minded to explore the realms of impossible to make it possible. Innovation always comes from a human starting point of observation or questioning. Art allows more for intuition, less on studying prediction, working in known rules.
Modern art and modern physics have been combining, each providing to the ones ready to look and invest in the other, those multiple perspectives, those different dimensions of possibility to shift their thinking.
So we need to rebuild and recombine
Specialization has a place but has it been pushed too far? Often we hear that the world is “complex”, or the issues cannot be resolved by the best minds in the ‘given’ area, well we need a new way based on total knowledge. Piero Scaruffi offered his view in a talk on “Bridging the gap between Art and Science” at Swissnex, in San Francisco in 2007.
He remarked “the digital age is providing us the opportunity to rebuild the continuum …has enabled an unprecedented degree of exchange, interaction, integration, convergence and blending” Scaruffi suggests we are able to move out of the discrete spaces we have found ourselves in and finally recombine knowledge in new ways. He argues we live in a context specific world that is based increasingly on knowledge-specific society, so different from the last time art and science came together in a knowledge-deprived society to offer this new continuum. Perhaps we are about to arrive at the age of the “rinascimento l’innovazione”, the innovation renaissance period.
Why can Art and Science combine?
Firstly all of what we do comes from us as humans as its starting point for innovation; it is linked to experiences and questioning. Every human activity is to some degree artist. The problem we always face is that dogma rules, and in this case of science and art we do have a given mindset to keep separating whereas we should be combining in new and novel ways. We have built up stereotypes and prejudices that need challenging. Science chases progress, Art really does not, it just looks to make change and it does this from evolving multiple perspectives. Sometimes, Science is often constrained by a far too linear approach and this needs somehow changing where we need to think in less rigid, structured ways today. We are demanding, no, expecting, more in the future. Art and Science agree they are both forms of exploration, one explores the imaginary more and then this challenges and pushes the scientific and engineers to find the answers. They both change our reality and innovation should always be pushing our expectations that little bit more.
Perhaps the ‘combining’ definition lies here?
Amy Kelly wrote in her paper Art-Science Connections: An investigation of creative innovation for her thesis, proffered an allencompassing definition of art and science, offered by one of the people she interviewed, that also helped me understand why art and science can be combined:
“ He then gave me his idea for a definition that both confirmed my original hunch and contradicted my original hypothesis, that art and science are essentially the same.
He said that there is “art” and there is “science” in the disciplines of both art and science. “Science” can be thought of as the mastery of concepts and skills; it is what stems from a strong sense of commitment during times of little inspiration.
Science is learning the rules, techniques, and methods of the activity a person is engaged in. “Art,” on the other hand, happens after mastery of the science. It manifests itself when a person inserts his or her own creative will into the process, or “breaks the rules” in some way, allowing one to exceed normal limitations.
Art occurs when a person realizes that he can indeed bend rules in order to see things in a different light. Often, this may follow one’s entry into “the zone” which facilitates the creation of new, unique ideas. Art isn’t science or vice versa. Art transcends science. When looking at art and science in this way, it is easy to understand that all scientists are not artists”.
“The art of innovation needs to be broken out of the science that needs to be applied”.
We come back to my statement that needed explaining. Both art and science are integral, they, when they combine, help us understand the world we have and the world of possibilities we can aspire too. We need both order and insight and it is these two book ends that when we bring them together, then often we have those ‘awe-inspiring, breath-taking, stunning, wonderful moments that transform our lives or the lives of others. To quote Piero Scaruffi again: “art and science cause a fundamental change in the nature of reality itself”
As I said “We do need to harness the energy of innovation and we are not yet fully achieving that” embracing both art and science together will enable us to move from evolution to revolution, sometimes called enlightenment periods, as we need to meet some difficult challenges that cannot be incremental, but far more radical in their solutions and this requires cross disciplines to come together. Let’s seek out growing ‘mutual comprehension’ and harness the power of art and design, science and engineering and stop talking about them separately, shall we?
Author note: I’ve drawn from papers or interviews from Jonathan Ashley-Smith, Kristi Charish, Piero Scaruffi, John Maeda and Amy Kelly. Thanks
image credit: nonprofituniversityblog.org
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Paul Hobcraft runs Agility Innovation, an advisory business that stimulates sound innovation practice, researches topics that relate to innovation for the future, as well as aligning innovation to organizations core capabilities.
Innovation and Organizational Savviness
Posted on October 26, 2012 by Drew Boyd
Navigating complex organizations takes skill and savviness, or what some call office politics. It is such an important skill that world class companies like GE and Johnson & Johnson teach it to their employees and reward them for using it. We may not like it, but for good ideas and people to survive, we must build organizational savviness and influence skills.
Succeeding at innovation takes that same organizational savviness. Here are eight tips to improve your innovation savviness:
1. You don’t have to be the smartest guy in the room.
Corporate rookies, especially newly-minted MBA’s, rush in with the goal of getting to the best answer faster than anyone else in the room. Even when you are the smartest guy (gal) in the room, you should avoid this behavior. Otherwise, you will gradually lose allies. People will stop inviting you, and you will soon become a “solo act.” Instead, work hard to offer your ideas with the intent of combining them with the best of others. Be seen as an integrator of ideas rather than competing to create the best idea.
2. Make sure your innovation efforts are seen as relevant.
It’s tempting to be the first to jump on the latest fad and prove your entrepreneurial spirit. However, by doing so, you risk being seen as someone who is out of touch, too theoretical, or “chasing windmills.” You may think you have a good grasp of what’s relevant to the organization. But your views may differ dramatically from what the boss sees at her level of the organization. Instead, make sure you solicit advice about the relevance of your project. How does it link to the strategic initiatives of the firm? How would you explain your project’s importance to an outsider? Pull out if you have difficulty making this link.
3. Work only on those projects with a clear, supported mandate from senior management.
While your innovation project may be relevant, that is not the same as having a mandate. Many initiatives and ideas may be relevant to the organization’s success, but only a limited number get the necessary dollars and headcount to be successful. Link yourself only to projects that have management’s support. Avoid being sucked into every initiative that comes your way. If you are talented, people will want your time and energy on their projects. Be sure to “limit rather than dilute” – it is better to succeed on a few projects than deliver marginal results on many.
4. Timing is everything.
Every project or initiative follows a predictable life cycle: intro, growth, maturity, and decline. Be sure to join innovation initiatives early in their life cycle, and get out when they mature. Some make the mistake of hanging on too long, after the program has lost its “oomph.” Either they didn’t see the decline coming, or they became too comfortable to change. Either way, they are doomed if they stay with an innovation program to its bitter end.
5. Learn to recognize…and deal with…sabotage by others
People treat ideas differently depending on the source of the idea. If an idea comes from an internal peer rival, people tend to see it as tainted. They sabotage it because it’s not theirs. If the same idea had come from outside the firm (from a competitor or consultant), people overvalue it. They see it as tempting. You should expect to see this behavior and have ways to neutralize its effect. One way is to notassociate ideas with a specific person, especially you. Contrary to popular wisdom, avoid giving attribution the person who created the idea. This makes sure the idea is stripped of any associations related to the inventor. The idea now has its best chance of survival.
6. Savviness is not the same as manipulation.
There is an old saying in the corporate world: “Don’t make enemies of your peers. If you do, you won’t need more enemies – they can ruin just fine.” When navigating the innovation waters, don’t see it as a political chess game where you have to manipulate others to get what you want. Savvy innovators have a high level of political astuteness and possess strategies and skills for ethically navigating the corporate terrain to gain “organizational influence and impact with integrity.”
7. “It’s not what you don’t know that will kill you. It’s what you know that ain’t really so.”
Will Rogers is credited with this savvy quote. That wisdom holds true today for innovation. People let their current knowledge about an issue blind them to other facts that may contradict their beliefs. Holding onto a belief that you are certain is true…only to find out later that it isn’t…will cause others to question your flexibility and judgment. Learn to recognize this blind spot (called Confirmation Bias), and seek ways to weigh data equally, including data contrary to your point of view.
8. Treat yourself to continuous development and improvement.
The biggest mistake corporate innovators make is they stop developing themselves. Your first priority is to assure your relevance to the organization, and you can do that only if you take the time to learn new skills and update old ones. If you are doing today’s job on twenty year old skills, you have become the proverbial “dead man walking.” Instead, you should make every year count – take time to do something, anything that develops and improves your innovation abilities.
image credit: fresh spectrum
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Drew Boyd is Assistant Professor of Marketing and Innovation at the University of Cincinnati and Executive Director of the MSMarketing program. Follow him at www.innovationinpractice.com and at http://twitter.com/drewboyd
Booz & Company 2012 Global Innovation Study
Posted on October 31, 2012 by Barry Jaruzelski
Every economic downturn comes with the same refrain: The world, we’re told, is losing its creative capacity, hurting our chances for a speedy recovery. Yet inevitably, when worries about innovation erosion surface, some company rises up with a great new product, technology, or service to prove the naysayers wrong. And all too often, observers simply fail to pay attention to the many companies that make successful innovation part of their regular practice — indeed, their operating model — in ways that don’t necessarily make big headlines.
Those companies are the quiet stars of our annual Global Innovation 1000 study of R&D spending. As our study has consistently shown over the past eight years, there is no long-term correlation between the amount of money a company spends on its innovation efforts and its overall financial performance; instead, what matters is how companies use that money and other resources, as well as the quality of their talent, processes, and decision making. Those are the things that determine their ability to execute their innovation agendas. In 2011, corporate spending among the Global Innovation 1000 increased 9.6 percent over the previous year, slightly faster than the 9.3 percent gain in 2010. But because corporate revenues grew by a robust 13 percent last year — even faster than the year before — R&D intensity, or the percentage of sales that companies spend on innovation, actually declined to traditional pre-recession levels.
INTERACTIVE FEATURE (click spending report links below)
Top 20 R&D Spenders 2004–2011: An interactive look at the 20 publicly traded companies worldwide that spent the most on R&D over the past eight years.
R&D Spending by Regions and Industries: This interactive graphic compares R&D spending by regions and industries from 2004 through 2011.
Of course, some companies get more bang for their innovation investment buck than others. Over the past few years, we have carefully analyzed the innovation strategies, capabilities, and cultural factors that enable some companies to consistently achieve superior financial results. This year, to further clarify those performance drivers, we surveyed nearly 700 companies and interviewed 12 senior innovation executives and chief technology officers at leading companies. Our goal was to gain insights into the early stages of innovation — when companies generate ideas and then decide which ones to develop.
2012 GLOBAL INNOVATION 1000 STUDY
Watch the video below – The 2012 Global Innovation 1000 Overview - where authors Barry Jaruzelski and John Loehr discuss the results of the Global Innovation 1000 study, focusing on the “fuzzy front end” of the innovation process:
The Up-Front Process Revealed
Perhaps the most surprising result of our study of the up-front innovation process is how many companies say they simply aren’t very good at it. Just 43 percent of participants said their efforts to generate new ideas were highly effective, and only 36 percent felt the same way about their efforts to convert ideas to product development projects. Altogether, only a quarter of all respondents indicated that their organizations were highly effective at both. (See Exhibit 1.)
“If you have a creative idea and it doesn’t create value,” says Matthew Ganz, vice president and general manager of research and technology at the Boeing Company, “it’s not technology. It’s art. If you’re all about value creation with no creativity, the accountants are going to take over. You need to prime the pump with creative ideas, and then you need to have rigorous processes in place to turn those ideas into dollars.”
The second critical finding calls into question a common assumption about innovation. It’s often said that the means by which companies seek out and find good ideas tend to be vague, or fuzzy, or highly variable from one company to another. Yet according to our survey, the most successful innovators in all industries have developed a variety of consistent, manageable ideation practices that are well aligned with their innovation strategies. And when moving ideas into the development stage, they tend to depend on an equally consistent set of principles and processes. Indeed, any company in any industry can take advantage of these tools and processes to get the most out of the money they spend on innovation.
The types of techniques and tools they employ, however, depend in large part on each company’s favored innovation strategy (although these distinctions are more pronounced in the ideation stage). A great deal of the work we have done in the annual Global Innovation 1000 studies over the past several years has involved teasing out the different ways companies approach innovation, and the implications of those approaches. Five years ago, our research showed that nearly every company follows one of three fundamental innovation strategies, each of which has its own distinct way of managing the innovation process and its relationship to customers and markets. We thus categorize companies as Need Seekers, Market Readers, or Technology Drivers.
Need Seekers, such as Apple and Procter & Gamble, make a point of engaging customers directly to generate new ideas. They develop new products and services based on superior end-user understanding. Their goal: to seek out both articulated and unarticulated needs, and then to try to get their new products to market first.
Market Readers, such as Hyundai and Caterpillar, use a variety of means to generate ideas by closely monitoring their markets, customers, and competitors, focusing largely on creating value through incremental innovations to their products. This implies a more cautious approach, one that depends on being a “fast follower” in the marketplace.
Technology Drivers, such as Google and Bosch, depend heavily on their internal technological capabilities to develop new products and services. They leverage their R&D investments to drive both breakthrough innovation and incremental change, in hopes of meeting the known and unknown needs of their customers via new technology.
As in the past, our results this year suggest that following a Need Seekers strategy, although difficult, offers the greatest potential for superior performance in the long term. Fifty percent of respondents who defined their companies as Need Seekers said their companies were effective at both the ideation and conversion stages of innovation, compared with just 12 percent of Market Readers and 20 percent of Technology Drivers. These are the same companies, by and large, that consistently outperform financially.
It is critical to remember, however, that companies can significantly outperform their peers no matter which of the three strategies they follow. A far more critical factor is how well they follow their chosen innovation strategy: Is it tightly aligned with their overall business strategy? Have they put in place the innovation capabilities needed to support their strategy? Do they have the right corporate culture needed to make that strategy
work? And are they using the tools and processes that will yield the best new ideas and development projects, consistent with their innovation model? Companies that can coherently align all these aspects of the innovation process, and execute them well, have a distinct advantage in the race for new ideas, products, and services.
The Lightbulb Moment
Where do ideas come from? That seemingly simple question is at the heart of the initial phase of innovation, when companies try to capture the best thinking about how to create breakthrough products and services that might transform their position in the marketplace, as well as the incremental improvements to their current product portfolios that can refresh tired brands. Few companies succeed at innovation without ensuring that adequate processes are in place to generate new ideas, and that those processes are followed in a disciplined fashion. Yes, serendipity will always play some part in the effort, and we’ve heard plenty of stories over the years about great ideas evol ving out of chance meetings, sudden flashes of insight, and sheer luck. Large companies, however, simply can’t depend on happenstance, and the most successful ones understand that clearly.
In the past, large companies typically turned to a highly “vertically integrated” innovation model, in which most of their new ideas stemmed from internal sources; an archetypical example is the old AT&T, whose Bell Labs conducted groundbreaking research, and, together with Western Electric, developed many of the ideas and products that now define our networked world. (See “Innovation at Bell Labs,” by Edward H. Baker.) More recently, companies have turned to a wider range of sources for ideas, from suppliers and customers to outright acquisition of companies with good ideas in their own pipeline.
All these laudable efforts have led many companies to say, at least anecdotally, that coming up with new ideas is not as big a problem as selecting and converting them to development projects, and the survey results and interviews validate this hypothesis. Darlene Solomon, chief technology officer of measurement company Agilent Technologies, and CEO Bill Sullivan use the term cloud of innovation to refer to the large number of early-stage ideas available for potential investigation. Most of those ideas, Solomon says, “aren’t yet sufficiently formulated for businesses to decide to take them to product. There are always more ideas we want to invest in than we can realistically move through the life cycle, but it is these fragile ideas that seed future breakthrough products.”
Still, considering that 57 percent of respondents say their company is just marginally effective at idea generation, and a similar proportion say their company’s culture does not support efforts to come up with new ideas, it is clear that many companies have much to learn about the best processes for generating ideas. Moreover, companies’ level of effectiveness at this early stage of innovation turns out to be a strong predictor of financial performance. The 25 percent of survey respondents who said their company was highly effective at both ideation and conversion also reported outperforming their industry peers on three important financial measures: revenue growth, market cap growth, and earnings as a percentage of revenue. The same held true for companies whose employees said their culture supported early-stage innovation efforts. (See Exhibit 2.)
However, our survey also revealed that there is no correlation between financial performance and the particular processes companies use at the idea-generation and idea-conversion phases. Overall, companies continue to depend on a set of long-standing, reliable methods for coming up with new ideas. The most common method, by a substantial margin, was “direct observations of customers,” ranked number one by 42 percent of all respondents. “Traditional market research” was a rather distant second, at 31 percent. We also looked at the kinds of external networks companies turned to at the ideation stage; again, the most common was talking to customers, followed by working with channel partners. Finally, when asked what internal mechanisms their company used, most respondents pointed to “innovation champions” — people assigned to coordinate the capture, development, and internal promotion of new ideas — followed by “cross-functional collaboration” among different business units.
Another noteworthy survey finding is the limited use of open innovation in idea generation. In the past decade or so, the concept of open innovation has generated a great deal of buzz, and a small but growing number of companies are seeking out new ideas from a variety of sources outside their conventional domains, including innovation contests and social networking. However, less than 15 percent of all companies ranked mining social media for ideas and using open innovation as important. We see indications of why some companies see value in the techniques while others are left cold. Companies in more consumer-oriented industries, including software and Internet, computing and electronics, consumer, telecom, and some healthcare sectors, are twice as likely to employ social media in their search for new ideas than are companies in sectors with more highly engineered products and services, such as auto, industrials, aerospace, and chemicals and energy, where these methods seem to have less efficacy.
Different Strategies, Different Tools
In our survey, and in follow-up interviews, we asked respondents about the mechanisms and processes their company employed, as well as the degree to which they depended on both internal and external networks. Clearly, several ideation techniques are common to all innovators, but by and large, companies seem to focus on the tools and processes that are most aligned with their chosen innovation strategies. In each of the areas critical to early-stage innovation, the initial capturing of ideas and the process by which companies decide to move their good ideas into the product development process, we find considerable variation. (See Exhibit 3.)
Need Seekers. These companies understand the importance of developing strong relationships with customers — they rely more heavily on customer observation than do companies that follow either of the other two strategies, and less on pure market research. Indeed, Need Seekers’ reliance on mechanisms that can provide deep insights into the end-users of their products goes beyond their willingness to observe customers directly; they also depend more on customer focus groups and “idea workout” sessions than do Market Readers or Technology Drivers. Further, they are more likely to leverage social networking (10 percent say they use it) and deep analytics involving customer data.
According to the survey, Need Seekers also make avid use of internal networks — especially those involving innovation champions. Indeed, on an indexed basis, Need Seekers are much more likely than companies following the other two strategies to put people into this role, and even more likely to see such champions as an effective element of their ideation processes. Cross-unit staffing, formal idea conferences, and communities of practice are also popular among them; in fact, companies classified as Need Seekers use all these internal network structures at higher rates, and view them as more effective as well.
Externally, Need Seekers tend to rely on networks of customers, followed by their channel partners and suppliers. Again, Need Seekers use these networks more consistently than the other two groups and also see the networks as being more effective. Says Tom Kavassalis, vice president of strategy and alliances at the Xerox Corporation, “We call what we do customer-led innovation, and its whole purpose is to make sure that our innovation process is really relevant to customers. We frequently host customers at our R&D centers and have them talk about what keeps them up at night, and where they think technology might be helpful. We look for customers who are risk takers, willing to be the
guinea pig in the deployment of a new solution. In exchange for them giving their insights into their needs, we give them the opportunity to be an early adopter of something really new.”
In their search for new ideas, Need Seekers frequently cast their nets wide. Douglas Smith, chief technology officer at the Timken Company, notes that for its first 100 years, this machine components manufacturer “was a closed innovation shop. If the research didn’t happen inside our four walls, then it didn’t happen in any of our plants or in any of our engineering areas. Over the past decade, we’ve come to appreciate that there are lots of other good, smart companies and exceptional talent out there. We’re developing new ways to tap into other pools of knowledge — from customers and suppliers to universities and third-party companies. We find that we can create the best value when we complement our internal scientific knowledge with external perspectives and approaches. Having an operating model that aligns the right access to new ideas at the right cost and the right risk creates a win-win situation for both parties.”
Market Readers. These companies face a different strategic challenge. Their goal is to find ideas that lie within their business expertise, which they can then develop into incrementally improved products to take to market quickly and efficiently. They thus tend to focus on the further development of products that have already been introduced by competitors. Market Readers are the most likely of the three to rely on traditional market research to understand better what is already working in their markets. And they are significantly more likely than the others to turn to their customer support and sales teams for ideas about how they can improve the products they already have. This feedback loop between sales and R&D is critical for Market Readers, but companies that rely too much on it may find themselves with a new-product portfolio heavily weighted toward incremental improvements — a strategy that can work, although it depends greatly on the company’s ability to carry it out as efficiently as possible.
Market Readers depend less on networks of every kind than do either Need Seekers or Technology Drivers — which may be a further effect of the sales/R&D feedback loop. As a rule, they tend to find communities of practice and focused innovation networks effective in generating ideas, which is perhaps symptomatic of their determination to ensure rapid delivery of new products into the market. And when going outside the company for ideas, they are more likely than Technology Drivers to depend on their customer and supplier networks, but less likely to depend on universities and government agencies for new ideas, than companies following either of the other innovation models.
Tana Utley, chief technology officer of Caterpillar Inc., underscores why engagement with customers is crucial: “I’ve seen organizations let their engineers showcase technology ideas and develop some of them, but the innovation that results is often not directed to solving customers’ most pressing problems. If it doesn’t relieve a particular customer pain point, then there’s no compelling case to pull it through all the gates into production. As we develop projects, especially areas of new technology, we engage customers. And by the time we get the product out to them, it’s something that they can use in their business.”
Technology Drivers. These companies take a generally more self-reliant, inward-looking approach, impelled largely by their desire to develop new products based on the latest advances in technology. The key is to gain a broad understanding of what’s possible, and to use that understanding to direct their own R&D.
Technology Drivers’ forays into the market also include regular external idea and technology scouting. These companies depend to a greater extent on internal mechanisms such as regular meetings of their own experts, communities of practice across company business units, and technology road mapping, to develop far-reaching ideas that go beyond anything the market could suggest.
“Consumers don’t always know what is possible,” says Girish Nair, senior vice president of corporate strategy and alliances at Hewlett-Packard. “They can describe what they want, but they can’t know what the technology can do, especially because what the technology can do changes rapidly. You have to create it, show that it can be done, and then iterate.”
The risk for Technology Drivers is that their ideas and products, which reflect a highly technological imperative, may not be fully attuned to markets and customers. According to the survey, many of them do little to mitigate this risk in their use of ideation tools. Indeed, like Need Seekers, they rank innovation champions as the most common and effective internal networking mechanism. But Technology Drivers use such champions at a considerably lower rate. They also turn less frequently to the top outside networks — customers, channel partners, and suppliers — than do either Need Seekers or Market Readers.
From Ideas to Products
The process of choosing which ideas to convert to full-scale product development is perhaps even more critical to a company’s innovation success than is the ideation stage. The conversion stage is the point at which companies use all the processes and tools at their command to decide whether a given idea in the pipeline is a “go” or a “no go.” In the view of many innovation experts, this is where the most value is added. Says John Evans, corporate vice president for technology and innovation at the Lockheed Martin Corporation: “The conventional financial metrics appear to say that most of the value is created in the last steps of a project: development and commercialization. But those steps are the most expensive and risky. I believe that it’s this middle conversion phase, which we call investigation, where the value of a project can go up by a factor of 10.”
Most companies maintain data on their conversion rates, and on the rate at which products in development ultimately find their way into the marketplace. Overall, 43 percent of survey respondents said their company converted fewer than 20 percent of its ideas to development projects, and just 12 percent reported moving more than 60 percent into development.
These numbers, however, don’t really reflect the attitudes of innovators toward the number of ideas that ought to be generated, and the percentage of projects that should not be further developed. In this regard, company size matters. Our survey results show that the smaller companies in the Global Innovation 1000 (the companies ranked 101 to 1,000) report themselves to be twice as effective at the conversion stage as their largest peers (the companies ranked in the top 100), no doubt because the organizational issues are less complex, and ultimately less bureaucratic.
Compared with the processes and tools used at the ideation stage, those used at the conversion stage do not vary much among the three strategies. Three-quarters of all companies, for instance, depend on internal networks for help in vetting ideas for further development — an unsurprising result given that most companies, even Need Seekers, simply do not go far afield for conversion of their ideas, and some might even see going afield as a risk. The only external mechanism that many companies report using is “leading customer reviews,” in which top customers are given an early glimpse into the development pipeline. This tool is most popular among Market Readers, perhaps because their general cautiousness prompts them to double-check whether their products will succeed in the marketplace given existing alternatives.
Yet the true key to success at the conversion stage isn’t the specific tools and mechanisms used — after all, companies report that, by and large, they all use quite similar processes. The key to success is for companies to have the right people in place to manage the process, using experience and judgment to rigorously make the needed decisions. Says Solomon of Agilent: “Our pipeline is about how much we think a technology can move the needle in creating value for our customers, and usually, that’s not a numbers question when you are assessing a disruptive technology. It’s easy to make anything look good. [What matters is] the judgment of people who are very experienced in leading research, and we are fortunate to have really smart people who have a good combination of technology and business sense.”
That combination is critical when deciding which ideas to carry through to commercialization and which to kill. As ideas and projects move down the pipeline, business considerations become increasingly important. “In managing the research portfolio that is in the labs’ funnel,” says Solomon, “we constantly ask ourselves, ‘What have we learned about the technology that makes it more or less attractive than [it was] six months ago? What have we learned about the market, the competitive technologies — and what’s going on in the world that might help us decide whether the technology is now even more valuable or perhaps becoming a “me-too” technology? What has changed within Agilent in terms of our business priorities?’ All of these perspectives evolve over the course of our longer-range research, and influence our decision whether or not to continue to invest in a particular project.”
Achieving R&D Success
Of course, even the best business management cannot overcome poor decisions about which ideas to move into development, or add significantly to value if the idea itself isn’t strong. Thus, the quality of those early ideas, and of the ones pushed past the conversion stage, is critical. To ensure good decision making, executives need to make use of the processes and techniques best suited to their chosen innovation strategy, and put the right people in place to execute on them.
As the business environment becomes ever more competitive, the need to innovate successfully becomes ever more acute. Says Utley of Caterpillar: “There is nothing like a powerful external market force to really drive an intense innovative environment. And there is nothing that
drives creative energy like that feeling in the pit of your stomach when you have a goal that you have to achieve and it’s still pretty far away.” Harness that energy as you move forward with your innovation efforts, taking comfort in the fact that your performance during the crucial front end can be much more consistent and manageable than you thought possible.
PROFILING THE GLOBAL INNOVATION 1000
Worldwide R&D spending among the Global Innovation 1000 increased 9.6 percent in 2011, to US$603 billion. Coming on the heels of last year’s rise in spending, this makes it clear that we have emerged from the latest financial crisis with a stronger commitment to innovation investment than we did after the dot-com meltdown in 2000. In the first three years following that collapse, innovation spending increased at an annual rate of 3.5 percent, compared with 9.5 percent between 2009 and 2011. Yet despite this significant growth, average R&D intensity (innovation spending as a percentage of sales) actually declined one-tenth of 1 percent in 2011, because the Global Innovation 1000 generated sales of a staggering $17.6 trillion last year. (See Exhibit A.)
The top 100 companies accounted for 50 percent of the growth in R&D spending, and now represent 62 percent of the total spent on R&D by the Global Innovation 1000. Overall, three-quarters of companies increased their spending, up from 68 percent in 2010, whereas just 19 percent spent less. The top 20 spenders increased their innovation investments by $5 billion, accounting for just under 13 percent of the overall increase. (See Exhibit B.)
Together, the computing and electronics, healthcare, and auto sectors once again accounted for the majority of overall spending — 65 percent in 2011. (See Exhibit C.)
Computing and electronics companies continued their reign as the top R&D spenders, accounting for 28 percent of spending worldwide ($167.2 billion), as well as the largest increase in spending during 2011. The industry increased its spending by $13.4 billion last year. (See Exhibit D.) This investment represents a 7.1 percent increase, and with revenues up just 3.5 percent, the sector’s R&D intensity rose from 6.1 percent to 6.5 percent. Samsung led the way, increasing its R&D spending almost 14 percent, to $9 billion, and raising its ranking to number six in the list of the largest spenders overall. As computing power moves into the cloud and consumers turn to less-expensive devices, sales of traditional electronics products such as PCs and digital cameras are slowing. It’s no surprise, then, that large, incumbent companies like Sony, HewlettPackard, and Texas Instruments have increased their R&D intensity in hopes of staying relevant.
Thanks largely to the auto sector’s strong recovery, spending on R&D in this industry increased by 15 percent, to a total of $96.5 billion, which was a far cry from the sector’s 14 percent spending cut in 2009. R&D intensity rose from 3.7 percent in 2010 to 3.8 percent in 2011. After falling to sixth place in the overall rankings in 2010, Toyota increased its spending by 16.5 percent and claimed the top spot. All the auto companies among the top 20 spenders in 2010 either moved up in the rankings or stayed the same in 2011, and Daimler entered the top 20 for the first time. Innovation remains critical for auto companies as they seek to meet ever more stringent fuel economy standards, boost the use of electronics in their cars, develop common platforms around the globe, and attract younger buyers.
Meanwhile, as its increase in absolute spending slowed in 2011, the healthcare industry’s R&D intensity dropped by three-tenths of 1 percent, to 12.2 percent, even though it continues to spend significantly on R&D ($126 billion in 2011). Of the eight healthcare companies in the top 20 spenders in 2010, all but Novartis and Sanofi fell in the rankings in 2011. Given the recent dearth of successful major pharmaceutical product introductions, many healthcare companies are hesitant to continue investing in innovation, choosing instead to steer profits to shareholders. Regulatory uncertainty has also taken its toll: Large pharma companies appear reluctant to invest in R&D without a clearer path to market.
Every region where Global Innovation 1000 companies are headquartered increased spending in 2011, although the results varied considerably. (See Exhibit E.) The biggest absolute gains were in North America, where companies increased spending by 9.7 percent, significantly above their five-year average increase of 7 percent. Similarly, Japan increased spending by 2.4 percent, well above its five-year average increase of 0.2 percent. Europe, however, increased spending by just 5.4 percent, somewhat below its 6.8 percent average increase, likely a result of the region’s continued economic woes.
China and India (grouped together here) increased spending by 27.2 percent in 2011, to a total of $16.3 billion — by far the greatest growth in R&D spending across all regions, albeit from a small base. Because China’s economy is much larger than India’s, and far more of its companies appear in the Global Innovation 1000 (47 companies, compared with just nine from India), China accounted for more than 90 percent of the countries’ combined spending. However, it is worth noting that their combined rate of growth was down from 38.5 percent in 2010, which may reflect the cooling down of the Chinese economy over the past year.
With an increase in spending in nearly every industry and geographic market, investment in R&D among the Global Innovation 1000 is now at an all-time high. Just a few years after the financial crisis gripped the world economy, today it is safe to say that global innovation investment has fully recovered — and is at a higher level than ever.
THE 10 MOST INNOVATIVE COMPANIES
For the third year in a row, we asked our survey participants to name the companies they thought were the world’s most innovative. This year, Apple didn’t just top the rankings (as it did the past two years); it increased its lead substantially. The company — which in August 2012 became the most valuable in history, measured by market capitalization — was named by almost 80 percent of respondents as one of the three most innovative companies in the world, up from 70 percent last year. Google held steady at number two; 43 percent of respondents included it among the top three, essentially unchanged from last year. 3M also maintained its position of high regard among respondents. It may not make headlines often, but the company again took third place, capturing the votes of just more than 15 percent of respondents. (See Exhibit F.)
Apple’s unchallenged position comes in a year marked by the death of the company’s founder and chairman, Steve Jobs, and by the absence of any truly new product introductions. Although the company’s absolute spending on R&D over the past three years has nearly doubled, to US$2.4 billion, it still spends just 2.2 percent of its sales on its innovation efforts, well below the average of 6.5 percent for the computing and electronics sector. And despite being one of the 2011 industry sales leaders in 2011, with $108 billion in revenue, Apple’s absolute R&D spend ranks only 16th within its industry and 53rd overall within the Global Innovation 1000. In contrast, Apple’s longtime rival Microsoft was the top spender in the software and Internet sector, and was ranked by respondents as the sixth most innovative company.
Last year’s sole newcomer to the list was Facebook. But that was back when the company was still rapidly growing its user base, and before its ill-fated initial public offering. The bloom may be off the rose for this erstwhile social media darling. Amazon has replaced Facebook in the number 10 position on the most innovative list. It’s about time that the online retailer appeared; although Amazon makes few products of its own, it consistently develops innovative retail strategies and services. The Kindle was the first breakthrough e-reader, but what made it truly innovative was Amazon’s decision to link it so tightly to its e-book business, effectively cutting out the competition. And Amazon’s foray into cloud computing, despite a few setbacks, continues to attract customers and increase revenues.
The 10 most innovative companies handily outperformed the top 10 spenders on R&D on several financial metrics — market cap growth, revenue growth, and earnings as a percentage of revenues (after normalizing for industry variations). (See Exhibit G.) Indeed, this year’s top 10 spenders actually underperformed in terms of both market cap and revenue growth, compared with their industry peers. And were it not for new entrant Amazon’s slim margins, the top innovators would have vastly outperformed their peers on earnings as a percentage of revenues. This only confirms our long-standing finding that a company’s financial performance and innovativeness do not correlate with how much it spends on R&D, but rather with how well it executes its innovation strategy.
This article was originally published October 30, 2012, on the strategy+business (www.strategy-business.com) website, published by Booz & Company Inc. (www.booz.com) Copyright © 2012. All rights reserved.
image credit: lowfoot
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Barry Jaruzelski is a senior partner with Booz & Company in Florham Park, N.J., and the global leader of the firm’s engineered products and services business. He created the Global Innovation 1000 study in 2005, and continues to lead the research. He works with high-tech and industrial clients on corporate and product strategy and the transformation of core innovation processes
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