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1988

Tough-Minded Ways
to Get Innovative
by Andrall E. Pearson

Like John Seely Brown, Andrall Pearson takes a broad view of innovation. And
like Peter Drucker, he believes that productive innovation – the kind that actu-
ally makes a company more competitive – arises from discipline more than
imagination. Pearson, an experienced corporate executive, sees innovation from
the trenches, not from the clouds.
In his article “Tough-Minded Ways to Get Innovative,” Pearson downplays the
need for great product or technological breakthroughs, instead encouraging
executives to seek steady, small enhancements in all business functions. Achiev-
ing that goal requires management that is simultaneously hardheaded and
open-minded. You have to be ruthless in ferreting out information about your
business’s existing innovation investments and in cutting off those that don’t
have a clear strategic purpose. But you must also have the guts to encourage
your people to constantly question their assumptions and to think freely about
the future. And when they do come up with a strategically sound idea, you need
to give them the resources they need to bring it to fruition. When it comes to
innovation, half measures just don’t cut it.

To beat the competition, Most chief executives fervently want the most powerful changes they can
their companies to be more competi- make are those that create value for
go for singles, not for tive, not just on one or two dimensions their customers and potential custom-
but across the board. Yet outstanding ers. The result? Competitive companies
home runs. competitive performance remains an constantly look for ways to change
elusive goal. A few companies achieve it. every aspect of their businesses. Then,
Most do not. when they’ve found them, they make
What distinguishes the outstanding sure that they translate those changes
competitors from the rest? Two basic into advantages customers will appreci-
principles. First, they understand that ate and act on.
consistent innovation is the key to a Lincoln Electric has understood and
company’s survival. Being innovative applied these principles for years. That’s
some of the time, in one or two areas, why it has been able to offer its cus-
just won’t work. Second, they know that tomers better products at lower cost year

Copyright © 2002 by Harvard Business School Publishing Corporation. All rights reserved. 5
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after year. Yet many people see only Begin with the Right Look at what Cummins Engine has
Lincoln’s success in cutting costs. They done to stay alive and gain market share
miss the fact that it is a great innovator
Mind-Set in a truck engine market that’s dramat-
because they think about innovation To convert a solid performer into an ag- ically off. As any key Cummins execu-
too narrowly – in terms of home runs gressive competitor, you have to create tive will tell you, the company cut its
only and not all the hits players make, an organization that not only values costs and prices per engine by close to
inning after inning, game after game. better performance but also sustains 40% and materially improved its prod-
Lincoln Electric and other outstand- the commitment year after year. That ucts for one simple reason: to prevent
ing performers look at innovation sys- means a major shift in values, not a the Japanese from repeating their auto
tematically. They know that their com- slight step-up in the number of new triumph in the truck engine business.
petitive successes are built on a steady ideas for next year. To accomplish all this, Cummins had to
stream of improvements in production, Even a brief exposure to companies overhaul nearly everything that, histor-
finance, distribution, and every other that are consistently successful inno- ically, had made it the industry leader:
function, not just a big hit in sales or vators shows their constant dedication products, processes, prices, distribution
marketing or R&D. So they make sure to changing things for the better. Every- methods – the works.
they’ve got players who can deliver con- one in the business thinks and acts that People throughout Cummins found
sistently. And they create organizations way, not just a few people at the top. the grit to make these changes by look-
that give those players all the backup Just picture what it was like to work ing at their business through the eyes
they need. That means at Apple Computer or Cray Research or of a Japanese competitor. Other inno-
• creating and sustaining a corporate en- Nike in their early years. Or consider vative companies do the same thing.
vironment that values better perfor- the way things are today at innovative They get their people to focus on beat-
mance above everything else, leaders like Wal-Mart Stores or Toys ing a particular competitor, not just on
• structuring the organization to permit “R” Us or Progressive Mutual Insurance. doing better. One-on-one competition
innovative ideas to rise above the de- Or ask anyone at Heinz about the pres- pushes the entire organization to be
mands of running the business, sure on innovation since Tony O’Reilly bolder, to take more risks, and to change
• clearly defining a strategic focus that introduced risk taking into that once more quickly than companies that have
lets the company channel its innova- sleepy outfit. Change is a way of life in no particular target for their innova-
tive efforts realistically – in ways that companies like these. tive efforts. It also makes a company a
will pay off in the market, To sharpen an organization’s recep- tighter, more effective competitor be-
• knowing where to look for good ideas tivity to change, several ingredients are cause its innovative efforts are designed
and how to leverage them once they’re essential. First and foremost, top man- to cut away at a particular opponent’s
found, agement must be deeply and personally current competitive advantages.
• going after good ideas at full speed, involved in the process. For instance, in the 1960s and early
with all the company’s resources Innovative companies are led by in- 1970s, PepsiCo was a much more ag-
brought to bear. novative leaders. It’s that simple. Lead- gressive and innovative company than
Individually, none of these activities ers who set demanding goals for them- Coca-Cola. It had to outflank Coke to
may be very complicated or hard to do. selves and for others, the kinds of goals survive. When Coke finally woke up –
But keeping a company focused on all that force organizations to innovate to after losing its market leadership – it
five, all the time, takes tremendous dis- meet them. Specific, measurable goals did a terrific job of innovating, too.
cipline and persistence. That systematic that constitute outstanding relative per- Why? Coke’s new management began
effort to institutionalize innovation is formance – like becoming number one to focus on beating Pepsi, not just on
what gives market leaders their edge. in a particular market. Not vague, easily doing better. And when Pepsi’s manag-
And it’s what other companies can learn reached objectives. ers responded by revving up their al-
from them. Innovative leaders aren’t necessarily ready aggressive culture, the result
creative, idea-driven people (though ob- made history. There has been more in-
Andrall E. Pearson was a professor of busi- viously many are). But they welcome novation in soft drinks in the past five
ness administration at Harvard Business change because they’re convinced that years than there had been in the previ-
School in Boston when he wrote this arti- their competitive survival depends on ous 20. Industry growth has doubled,
cle, and before that he was the president innovation. That’s a mind-set most exec- and both companies’ market shares are
of PepsiCo for 15 years. After becoming utives can develop – if their conviction the highest ever.
professor emeritus, he served as the chair- is based on a specific understanding of The same thing happened in the beer
man and CEO of Tricon Global Restau- a particular competitive environment, business when Miller began to take mar-
rants, the world’s largest restaurant chain. not just a bromidic generality. ket share from Anheuser-Busch. Sud-

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denly Busch became a much more ag- innovation a chief executive may make. •a mix of bright, creative minds (to get
gressive, innovative competitor because We learned that at PepsiCo when we ideas) and experienced operators (to
it was focused on Miller. In contrast, surveyed our middle managers and keep things practical);
I believe IBM paid a huge price in the found out that many of them thought • a process that moves ideas through the
1970s and early 1980s because the com- we were saying one thing and doing system quickly so that they get top-
pany wasn’t focused on a number of another. We had to correct signals and level assessment, endorsement, and
specialized competitors that were erod- practices like these before the managers resources early in the game–not at the
ing its leadership, segment by segment. would credit what we said. bottom of the ninth inning.
If you don’t have any major com- All three of these ingredients – com- There are, of course, lots of ways to
petitors, you can’t focus on them, of mitment, a specific villain, and risk tak- organize your company to bring these
course. But targeting smaller local com- ing–are soft requirements. Not tangible four elements together. One is to use
petitors is just as effective and invigo- things like structure and process. But task forces on either a full- or part-time
rating. It’s also a good way to ward off just because they’re soft doesn’t mean basis. Even Procter & Gamble (the ulti-
the complacency that undoes a lot of they’re unimportant. In fact, unless all mate product-manager company) has
winners. At one time, for example, Frito- three are in place, I question whether begun to superimpose multifunctional
Lay thought that it didn’t have to pay at- you’ll ever emerge as a leader. project teams, often headed by senior
tention to its regional competitors since managers, onto its old structure. Other
its market share was more than 50%. Unsettle the Organization companies use full-time task forces to
Then, collectively, the little guys cut the Most big organizations are designed achieve similar goals. They’ve found
company’s growth rate in half. Frito be- mainly to operate the business: to get their old structures didn’t allow enough
came very focused very fast. the work done, control performance, cross-functional interaction early on.
Finally, innovative companies have spot problems, and bring in this year’s Or enough top-level involvement and
lots of experiments going on all the results. And for the most part, that’s as support.
time. This encourages more risk taking it should be. Still other companies, like Hasbro,
since people don’t expect every experi- But the structures, processes, and peo- rely on frequent, consistent, and free-
ment to succeed. It contains costs since ple that keep things ticking smoothly wheeling meetings with top manage-
tests and trials don’t get expanded until can also cut off the generation of good ment to achieve their integration goals.
they show real promise. And it improves ideas and can block their movement They work within the existing structure
the odds of success because you’re bet- through the business system. Excessive but install a process to prevent rigidity
ting on a portfolio, not on one or two layering, for example, kills ideas before and delay. Johnson & Johnson, on the
big, long-odds projects. senior managers ever consider them. other hand, has thrived largely by spin-
Sometimes, however, the work envi- Barriers fencing off R&D, marketing, ning off operations into small divisions
ronment is so risk averse that manage- production, and finance block up func- to encourage its general managers to act
ment has to bring in outsiders who tional problems until it’s too late for ef- more like freestanding entrepreneurs.
haven’t been intimidated by the sins of fective solutions. Elaborate approval sys- In all these cases, the companies are
the past. That was what happened when tems grind promising innovations to a striving to create the freedom needed to
PepsiCo acquired Taco Bell, which had halt. Staffers nitpick ideas or put finan- cross lines, get a variety of inputs, and
been run by an ultraconservative man- cial yardsticks on them long before they take risks. They’ve tried to organize the
agement team that regarded all new are mature enough to stand rigorous creative parts of the company differ-
ideas with suspicion. It took an infu- scrutiny. ently from the operational ones.
sion of three or four outsiders to create To get around organizational road- These efforts aren’t cost free, of
a critical mass and get the company blocks like these you have to differen- course. When you’re trying to change
moving again. tiate between what’s needed to run the and run the business at the same time,
Unfortunately, it’s very easy for man- business and what’s needed to foster there’s bound to be some competition
agers to convey the wrong messages creative activity. Most successful inno- and conflict. But bright people can live
about risk taking. Appearing to be short- vations require four key inputs: with that, and sooner or later the bumps
term oriented, giving the impression • a champion who believes that the new get smoothed out. The risk I’d worry
that only winners get promoted, search- idea is really critical and who will keep about is leaving one of the critical bases
ing for people to blame, second-guessing pushing ahead, no matter what the uncovered – by trying to make a cham-
managers who take risks (often before roadblocks; pion out of someone who isn’t commit-
they even have time to work out the • a sponsor who is high up enough in ted to a project, say, or neglecting to
bugs) – actions like these send a much the organization to marshal its re- temper your whiz kids with some sea-
clearer signal than all the speeches about sources – people, money, and time; soned people who’ll be able to tell them

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whether the product they envision can the major companies. about), and on taking over the prof-
actually be made. Because if you an- Finally, superior service can be an il- itable, residual business left open as
nounce you’re going to innovate more lusory and impractical goal for many Continental and American diversified
aggressively, yet you consistently come large retailers. It simply takes more man- out of cans.
up short, people will get discouraged agement and discipline than they can Both Hasbro and Crown Cork & Seal
and turn off. muster to bring so many outlets up to are tightly focused; they don’t try to be
a higher-than-average level of service all things to all customers. And because
Be Hardheaded About and keep them there. their directions are so clearly set, their
Your Strategy The moral here is that your strategic creative people can channel their efforts
Once the entire organization is com- vision has to be grounded in a deep un- toward things that will work against
mitted to stepping up the pace of inno- derstanding of the competitive dynam- competitors in their particular busi-
vation, you have to decide where to di- ics of your business. You have to know nesses. Strategic focus works – in real
rect your efforts. One way, of course, is the industry and your competitors cold. life, not just in articles about strategy.
to put smart and talented people to You have to know how you stack up on
work and pray that they’ll come up with every performance dimension (the way Look Hard at What’s
something great. But more often than Ford did before it was able to close the Already Going On
not, an unfocused approach like that gap on some 300 product features on How do you find good, concrete ideas?
produces lots of small ideas that don’t which it lagged behind Japanese com- Brainstorming is one approach, but
lead anywhere, big costs and embar- petitors). And you have to be hard- I’ve never found that very helpful, ex-
rassing write-offs, and a great deal of headed about using this knowledge to cept when nobody in the group knows
frustration and stop-and-go activity. position your company to gain a com- much and nobody cares whether the
In contrast, successful innovators usu- petitive edge. Are you big enough? Tech- output is realistic. No, I firmly believe
ally have a pretty clear idea of the kind nically strong enough? Good enough at the best backdrop for spurring inno-
of competitive edge they’re seeking. marketing? In short, you must be prac- vation is knowledge – knowing your
They’ve thought long and hard about tical – not go after a pie in the sky. business cold. Good ideas most often
what’s practical in their particular busi- Hasbro, a $1.5 billion (and growing) flow from the process of taking a hard
ness. And just as hard about what’s not. toy company, has a strategic vision that look at your customers, your competi-
Frequently, you’ll hear CEOs say that works. Unlike most of its competitors, tors, and your business all at once. So in
their company is committed to becom- Hasbro doesn’t focus on inventing new looking for ways to innovate, I’d con-
ing the low-cost producer, or the in- blockbuster toys. Its management will centrate on
dustry leader in new products and pro- take blockbusters if they come along, of • what’s already working in the market-
duction processes, or the best service course. But the company doesn’t spend place that you can improve on as well
provider. All are worthy visions or con- the bulk of its product development dol- as expand,
cepts – provided they apply to that par- lars on such long-odds bets. Instead, it • how you can segment your markets dif-
ticular business and company. But in centers its efforts on staples – toy lines ferently and gain a competitive advan-
many cases, the vision and the reality like G.I. Joe, Transformers, games, and tage in the process,
don’t match up. preschool basics that can be extended • how your business system compares
For much of smokestack America, for and renewed each year. with your competitors’.
example, the concept of becoming the Another fine example is Crown Cork & Looking hard at what’s already work-
low-cost producer is simply a cruel fan- Seal, one of America’s best-performing ing in the marketplace is the tactic likely
tasy. The Japanese already occupy that companies for more than 30 years de- to produce the quickest results. I call
position, in many cases permanently. spite its five-star terrible business – tin this robbing a few gas stations so that
So the best that U.S. manufacturers can cans. How did Crown do it, especially you don’t starve to death while you’re
possibly hope for is to close the gap, when it was number four, dominated planning the perfect crime.
which isn’t likely to bring them back to by two giants (American Can and Con- Lots of companies think that the only
being number one. tinental Can) that were in a mature busi- good innovations are the ones they de-
Likewise, leading the way in new ness where size and scale appear to be velop themselves, not the ideas they get
products has turned out to be a fool’s essential? Simple. Crown focused its ef- from smaller competitors – the familiar
mission for most companies in mature forts on growth segments (beverages), not-invented-here syndrome. In my ex-
industries like packaged goods. The rea- on being the lowest-cost producer in perience, the opposite is usually true.
son? Fewer than ten new products a each local area (instead of nationally), Normally, outside ideas are useful simply
year are successful, despite expenditures on growing in less-developed countries because your competitors are already
of literally tens of millions of dollars by (too small for the biggies to worry doing your market research for you.

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They’re proving what customers want lets like the plague. Women felt Taco working families high-quality products
in the marketplace, where it counts. Bell’s food was “too heavy,”“too spicy.” intended for microwave ovens and
I’ve found that good ideas come from So the company developed a taco salad aimed at the low end of the market.
all over – conventional competitors, re- served in a light flour tortilla and sea- So the company started out by devel-
gionals, small companies, even interna- soned very mildly. The addition of that oping a process to make and sell a line
tional competitors in Europe and Japan. salad increased per-store sales more of entrées for $1.69 each, which gave
So it may not surprise you to learn that than 20%, with 70% of the sales coming it a good price advantage. But unlike
most of PepsiCo’s major strategic suc- from women–mostly new customers. It other low-priced lines, Budget Gour-
cesses are ideas we borrowed from the also added about $100 million to Taco met’s products were comparable to the
marketplace–often from small regional Bell’s sales in its first full year. over-$2 competition. And it backed up
or local competitors.
For example, Doritos, Tostitos, and
Sabritos (whose combined sales total
roughly $1 billion) were products devel-
Good ideas most often flow from the process
oped by three small chippers on the
West Coast. The idea for pan pizza (a of taking a hard look at your customers, your
$500 million business for Kansas-based
Pizza Hut) originated with several local competitors, and your business all at once.
pizzerias in Chicago. And the pattern
for Wilson 1200 golf clubs (the most suc-
cessful new club line ever) came from It sounds simple, I’m sure: Pick out the product with first-class packaging,
a small golf clubber in Arizona. a big segment you’re not reaching, find promotion, and advertising (the kind
In each case, PepsiCo spotted a prom- out what consumers don’t like about ex- its low-end competitors didn’t think of
ising new idea, improved on it, and then isting products, and develop a product investing in).
outexecuted the competition. To some to serve them better. But it took Taco The result – a remarkable success in
people this sounds like copycatting. To Bell nearly two years to get the idea, an extremely competitive field previ-
me it amounts to finding out what’s develop it in R&D, test-market several ously dominated by three of America’s
working with consumers, improving on versions of the salad, and finally launch largest, most successful food companies.
the concept, then getting more out of the winner nationally. It’s a terrific example of how segmenta-
it. You can decide how much this idea Another, much more familiar, exam- tion and strategic focus interact. And,
appeals to you. But at PepsiCo it led to ple is what the Japanese have done in like most good ideas, it looks obvious –
$2 billion to $3 billion worth of success- the camera business. They decided that once you see how it works.
ful innovations. And without those in- a segment of camera users couldn’t As these examples show, successful
novations, the company’s growth would afford German top-of-the-line models segmenters are very clear about what
have been a lot less dynamic. but wanted vastly better pictures than they’re trying to do: offer their custom-
Next, I’d look at how to create seg- they could take with their Kodaks or ers better value than their competitors
ments or markets for your products. It Polaroids. Camera technology has been do. This usually takes one of three forms:
sounds simple, but, believe me, it takes around for a long time, and the Japa- lower prices, better-performing prod-
a lot of creativity and skill to segment a nese just hammered away at improving ucts, or better features for certain uses
market beyond simple demographics it until they succeeded in making supe- (a niche). Unless you can beat your com-
(which rarely ever produce meaningful rior 35mm cameras at a price people petitors on one of these three dimen-
segment edges or boundaries), ferret could afford. In the process, they cre- sions, your innovation probably won’t
out what individual groups of consum- ated and now dominate a huge segment be a big success. The key idea, of course,
ers really want (as opposed to what they that no one else had seen. is that you’re trying to outperform the
say they want), and actually create dis- Finally, there’s Budget Gourmet, a competition on a specific performance
tinctive product performance features four-year-old company you may never dimension and scale, not with vague
(despite the technological and opera- have heard of. Its management devel- platitudes. And successful innovators
tional problems you usually encounter). oped a profitable $300 million business don’t give up until customers reassure
Several examples illustrate what I from scratch in a field – frozen foods – them that they’ve done just that.
have in mind. At Taco Bell, the biggest characterized by enormous price pres- The third place to look for good in-
Mexican fast-food chain in the United sures, undistinguished products, little novative ideas is in your business sys-
States, top management found that innovation, as well as low returns. The tem. Beyond its products, every com-
working women were avoiding its out- founder’s strategic vision was to offer pany has a business system by which it

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goes to market. That system is the whole adapted from the burger business, Pizza business where it was once an also-ran.
flow of activities, starting with product Hut developed a personal pan pizza that Naturally, in analyzing your business
design and working its way through pur- could be served in less than five min- system and your competitors’, you have
chasing, production, MIS, distribution, utes. It was quick, tasty, and moderately to look at them dynamically since struc-
customer sales, and product service. It priced. And Pizza Hut rolled it out to all tural changes are usually at work alter-
ing what’s required for success. When
Philip Morris bought 7-Up, for example,
Even the best concepts or strategies tend to develop its management knew the company was
entering an industry that historically
incrementally. They rarely ever work the first time had allowed smaller brands to prosper
nicely. In fact, many Coke and Pepsi
out or unfold just as they were planned. bottlers also handled 7-Up. But the bat-
tle between Coke and Pepsi was heat-
ing up, and as it intensified, those cola
will come as no surprise that these sys- 4,500 stores and locked up the pizza- competitors put tremendous pressure
tems differ from one competitor to an- lunch business almost everywhere, al- on their bottlers to launch new prod-
other, even in the same industry. And most overnight. ucts, promote more often, and scramble
in almost every case, each competitor’s Another good example of using a for supermarket space. Both 7-Up and
system has particular strengths and vul- business system to maintain a competi- its new cola brand were left out in the
nerabilities that can provide a fruitful tive edge comes from the cookie busi- cold. A once forgiving industry had be-
focus for your innovative energies. ness. P&G decided it could produce come downright hostile.
The underlying concept here is that better cookies than Nabisco, the cur-
a distinctive system can give you a big rent leader, could. So the company came Go for Broke
competitive edge for all your products out with a great cookie that tasted and Even the best concepts or strategies tend
because it will help you leverage their looked better than Nabisco’s Chips to develop incrementally. They rarely
inherent consumer appeal in ways your Ahoy!, the market leader. Duncan Hines ever work the first time out or unfold just
competitors find hard to match. And cookies were the kind of superior prod- as they were planned. In fact, the origi-
once you understand how your busi- uct P&G has used to become the market nal concept or its execution usually gets
ness’s system works at each step – both leader time and time again. changed considerably before it’s ready
in terms of the marketplace and com- But its managers didn’t count on the to be implemented broadly. Pizza Hut’s
parative system costs – it’s surprising retaliatory strength of Nabisco’s direct pan pizza, for instance, went through
how often you’ll uncover weak spots store-to-door distribution system and four or five iterations. So even after you
in a competitor’s system or potential its intense desire to protect that big, spot a promising segment and develop
strengths in your own. profitable base system. a product to serve it, you’ve usually still
The number of Pizza Hut outlets Nabisco quickly matched P&G’s got at least one major hurdle to jump be-
(4,500), for example, dwarfs that of its cookie, in addition to expanding and fore you can capitalize on your new idea.
nearest competitor (about 500). Scale improving its entire cookie line. Nabisco Tab initially flopped as a diet cola be-
like that is no guarantee of success. But also used the leverage of its bigger sys- cause consumers couldn’t tell the dif-
it means that only the Pizza Hut system tem to get trade support and consumer ference between Tab with one calorie
can market pizza products on a national impact. Despite the inherent superiority and Diet Pepsi, which then had 100.
basis virtually overnight – and thereby of P&G’s single-product entry, it stood Then Coke figured out that it could dra-
preempt local competition. no chance against Nabisco’s system matize the difference by surrounding
At one time, the biggest marketing strengths. a bathing beauty with 100 empty Tab
problem Pizza Hut faced was lunch. Virtually any part of your business bottles. Armed with that insight, Coke
Compared with McDonald’s, its restau- system can be the basis for building a flooded the TV screen with ads and
rants had virtually no lunchtime sales, competitive edge. Product technology backed them up in stores with displays,
and neither did any of its pizza com- has been a fruitful source of systemic signs, and samples. It was frightening to
petitors. The reason, of course, is that it advantage for Cray Research. Lincoln see how quickly that one idea, which
takes 20 minutes to cook a pizza from Electric’s decades-long leadership is sounds pretty small, changed the com-
scratch in a traditional pizza oven, and based largely on a systemic edge in pro- petitive dynamics.
most people won’t spend that long at duction. Truly superior marketing and To take another example, the Wilson
lunchtime waiting to be served. By using service have made Fidelity Investments’ Sting graphite tennis racket was devel-
a new, continuous-broiling technology Fidelity Funds the dominant player in a oped to sell for half the price of the

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Prince graphite racket. But very few ally involve considerable front-end in- preempt or block out competition is
high-end consumers believed they could vestment and lots of management at- to do it right the first time.
get the same quality racket for $125 as tention. So in a world where money, I’m a firm believer in developing in-
Prince provided for $250, even though people, and programs are necessarily novations as fast as you can do each one
the less expensive racket was indeed as limited, this usually means that none of properly, which includes stopping to be
good a product as the more costly one. the projects get enough sustained sup- sure you’ve got everything needed to
Fortunately, an alert marketing person port and effort to be guaranteed suc- generate a big success and then going
at Wilson then uncovered a new seg- cess. The only way around it is to be dis- to war to make the idea a winner. It
ment for the Sting – people who were ciplined enough to say “next year” to sounds so obvious, you wonder why so
buying metal rackets because they most of the good ideas available. many companies fail to execute either
couldn’t afford graphite. Sting’s pitch Finally, people are often in such a of these pieces properly.
became “a graphite racket for the same hurry to get a new product to market To sum up quickly, I believe there are
price as steel,” and that positioning that they neglect to think through all five steps you can take to make your
made it a major success. the things needed to launch it properly. company more dynamic and innovative:
Once an idea or a concept is properly These include programs to get adequate Create a corporate environment that
developed, it seems logical to assume retailer support, advertising to gener- puts constant pressure on everyone to
that any sensible company would throw ate high customer awareness, and above beat your specific competitors at inno-
the book at it to make it a success. Yet all, trial-inducing devices to entice con- vation. Structure your organization so
I’ve found that reality is often quite dif- sumers to pick the new product instead that you promote innovation instead
ferent. As I look back, most of the new- of the one they’re already using. One or of thwarting it. Develop a realistic stra-
product mistakes I’ve seen grew from a more of these essentials often go by the tegic focus to channel your innovative
company’s failure to back up the inno- boards. efforts. Know where to look for good
vation with enough resources–not from In contrast, the big winners make ideas and how to use your business sys-
overspending. careful plans to throw everything tem to leverage them once they’re found.
Several factors explain this phenom- needed at new products to ensure their Throw the book at good ideas once
enon. First and most important, many success – money, people, programs in you’ve developed them fully.
people fail to recognize that their com- every functional area. They don’t just It all sounds simple because, of course,
petitors will retaliate–especially if their allocate resources; they marshal them, it is. Simple but not easy, since each in-
innovation takes customers away. People and then they execute them like the novation is a constant challenge from
get so captivated by their own product Russian hockey team or the Boston beginning to end. Yet innovation is a
that they plan launches implicitly as- Celtics. The successful companies have challenge you have to meet because
suming there will be no significant com- learned that doing it right the first time that’s what builds market leadership and
petitive response. Almost inevitably, is lots more effective (and usually far competitive momentum. That’s the bot-
that turns out to be a poor assumption. less costly) than doing the job on a shoe- tom line. And that’s why it’s worth the
Second, people try to stretch their string and then scrambling to fix things extra effort to become an innovative
resources to finance too many projects when what happens doesn’t meet ex- company.
at once because the prospect of four or pectations. They also know they’re
five successes instead of one or two is never going to have the first-blood ad- Reprint r0208h
so attractive. But new products gener- vantage again, and that the best way to To place an order, call 1-800-988-0886.

THE INNOVATIVE ENTERPRISE august 2002 11


EXPLORING FURTHER

To u g h - M i n d e d Way s t o G e t I n n o vat i v e

To learn more about the ideas in


“Tough-Minded Ways to Get Innovative,”
explore the related articles listed at
A RT I C L E S
the right.
“Waking Up IBM:
You may access these materials on How a Gang of Unlikely Rebels Transformed Big Blue”
the Harvard Business School Publishing Gary Hamel
Web site, www.harvardbusinessonline.org, Harvard Business Review, July–August 2000
Product No. 648X
or by calling 800-988-0886 (in the United
IBM’s story reveals the power of Pearson’s unsettle-the-organization principle.
States and Canada) or 617-783-7500.
After realizing Big Blue had to catch the Internet wave – or perish – several
nerdy, mid-level employees started an insurrection that put stodgy IBM back
on track. They wrote a manifesto infecting others with their vision of a Web-
savvy IBM. Then they created a coalition of equally impassioned supporters,
identified high-level champions, provided benefits for would-be opponents, and
scored small wins to gain momentum. The result? IBM became an e-business
powerhouse, drawing one-fourth of its $82 billion in revenues from the Internet
by 1999.

“Bringing Silicon Valley Inside”


Gary Hamel
Harvard Business Review, September–October 1999
Product No. 3464
This article expands on Pearson’s go-for-broke principle. Instead of allocating
resources based on where profit margins are highest and most immediate (re-
source allocation), Hamel recommends letting good ideas draw the needed capi-
tal and best talent (resource attraction). Only then can great ideas run for all
they’re worth, he asserts. To use resource attraction, ensure that no single indi-
vidual in your company can kill a great idea, that good ideas can come from
anyone, and that originators of commercially successful ideas get rewarded –
handsomely.

“Turning Goals into Results:


The Power of Catalytic Mechanisms”
Jim Collins
Harvard Business Review, July–August 1999
Product No. 3960
Collins describes additional tactics for transforming your company into an in-
novative enterprise replete with great ideas and profits. To mobilize your orga-
nization away from the status quo, use, as Collins terms it, catalytic mecha-
nisms: galvanizing, nonbureaucratic means of turning visions into reality and
propelling commitment levels past the point of no return. Examples of catalytic
mechanisms? Granite Rock invited customers who weren’t completely satisfied
with a particular product to cut that line item from their invoice payment –
without returning the product. This radical “short pay” policy mobilized em-
ployees to feverish performance levels. And 3M urged its scientists to spend
15% of their time inventing in an area of their choice – catalyzing blockbuster
products and fortyfold increases in sales and earnings.

12 harvard business review