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Innovation:
Core Competency for the 21st Century
by Robert B. Tucker
Despite the growing recognition that innovation is the only
sustainable source of growth, competitive advantage, and new
wealth, an Arthur D. Little survey of 669 global company executives
found fewer than 25 percent of the companies believe innovation
performance is where it needs to be if they are to be successful
in the competitive marketplace. Having tried an endless array
of alternatives, company leaders are now accepting enterprisewide
innovation as a key operational discipline, just as in the
past they adopted the disciplines of quality, planning, and
management.
Of course, innovation is not a new discipline in most organizations.
But the old ways, even those that may have worked in the '80s
and '90s, are no longer adequate. Firms across the board are
engaged in exciting experiments to reinvent the way they create
the future, because "business as usual" hasn't produced
the desired results.
Given the torrid pace of technological and global change,
the commoditization of product lines and industries, and convergence
of strategies, companies are literally having to reinvent
how they accomplish the all-important task of "inventing
the future." Having examined numerous companies and their
innovation approaches for a forthcoming book, I believe that,
winning firms will embrace the following four essential principles
of managing innovation in the new century.
Principle No.1 - A company's approach
to innovation must be comprehensive. One day in l977,
an engineer at Canon put a hot soldering iron a little too
close to an ink-filled syringe. The heat boiled a tiny amount
of ink in the needle, expanding it into a gas, which pushed
ink out the tip of the needle. The result of this accident
was Canon's breakthrough bubble jet printing technology.
At Pfizer Pharmaceuticals, scientists attempting to produce
a drug that would stimulate receptors in the human heart ended
up stimulating receptors elsewhere in the human anatomy, giving
rise to the impotence wonderdrug Viagra . NutraSweet, the
artificial sweetener, was discovered when a research chemist
working on an ulcer treatment, licked his finger to pick up
a piece of paper and noticed the astonishingly sweet taste.
While spending millions and even billions of dollars annually
on research, most companies innovation successes come about
primarily by accident. And while serendipity will always play
a role in innovation, most companies approach their innovation
process in a piecemeal, haphazard fashion that is anything
but comprehensive. This can backfire, as Gillette discovered.
Gillette powered through the previous decade largely on the
strength of a breakthrough product: Sensor. Introduced in
l990, the new shaving system kept imitators at bay with no
fewer than 29 patents and men from Jakarta to Peoria to Paris
raved about the closeness of the shave. Despite selling at
a hefty price premium, Sensor outsold its nearest rival ten
to one. Wisely wasting no time after Sensor's launch, Gillette
began development of Sensor's offspring, Mach3, which was
introduced in l998.
But Mach3, while a hit in North America, did not have the
same impact on revenue growth or stock price for Gillette.
The super-premium product sold poorly in financially depressed
Asian countries, growth stalled, and suddenly Gillette was
being mentioned as a takeover target. Formerly laudatory Wall
Street analysts began focusing on Gillette's heretofore hidden
weaknesses: ... inertia, inefficiency, mismanaged inventories
and receivables, a Golbergian corporate structure cobbled
together over years of acquisitions, it underperforming divisions.
The lesson of Gillette's sudden reversal of fortune is this:
while breakthroughs like Sensor are beneficial, innovation
must be promulgated in every area of the firm. Today, the
practice of innovation is generally similar to how companies
approached quality in the early 1980s. In those days, quality
was a department - products were inspected before they were
shipped. Now, quality is the responsibility of everyone in
the organization. It has become systematized: "It's the
way we do business around here." Today innovation is
still confined to a few departments - primarily R&D or
marketing. New ideas are almost always directed from the top
down, rather than emerging from the bottom up, from suppliers,
or from customers. But we are rapidly entering an era in which
innovation, by necessity, must become everyone's responsibility.
To produce ongoing results, a small but growing number of
firms are making innovation as much a responsibility of purchasing,
operations, and human resources, as it is for new product
development or marketing. It is not just a term to drop into
the company's advertising and marketing, it must be part of
the DNA of the organization. This deep commitment to innovation
as a core competency doesn't preclude a company from purchasing
smaller start-ups as part of its growth strategy. B&D
(buy and develop) is quickly taking its place alongside R&D
(research and develop) as part of company's comprehensive
approach. But growth through acquisition is no substitute
for a deep-seated commitment to home grown innovation, if
those acquisitions are to bear fruit.
The only thing that separates you from your competitors are
the skills, knowledge, commitment, and innovative abilities
of your people. To win the competitive game, every company
must strive to provide customers with a value proposition
that is noticeably superior to the one you offered yesterday.
To win, companies must respond to newly emerging customer
needs with well designed products and services and business
models that anticipate these needs. They must employ new technologies
that reduce their cost of doing business, and allow for greater
speed and customization.
For these reasons, innovation cannot be confined to one or
two departments or farmed out to an elite group of star performers.
Instead, it must permeate the entire company, and it must
encompass new products, new services, new processes, new strategies,
new business models, and the pursuit of new markets. It must
be comprehensive.
Principle No.2 - Innovation must include
an organized, systematic, and continual search for new opportunities.
Back in the early 90s, AT&T's top brass allowed a small
unit of its mammoth planning department to call itself the
Opportunity Discovery Department, or ODD for short. This band
of maverick thinkers gave itself the truly odd task of shaking
up the giant company's thinking. One day in l995, members
of the unit donned sandwich boards outside an important meeting
which read: "what if long distance were free?"
While the question was dismissed as "ridiculous and
irrelevant" at the time, today AT&T's long distance
revenue is declining so rapidly that the company may sell
off its long distance business in order to pursue faster-growing
parts of its portfolio. Moral: today's seemingly irrelevant
question could quickly become tomorrow's threat - or opportunity.
What methods do you and your company employ to detect changes
that could spell doom - if appropriate action isn't taken,
or boom, if they are. At firms that make innovation a core
competence, specific systems and practices are in place that
promote a deeper understanding of social, demographic and
technological change. Delphi Thermal Systems, the Westport,
N.Y. division of Delphi Automotive, has a Futures Council.
Eastman Chemical in Kingsport, Tenn., has formed a think tanks
to track the trends and ask searching questions such as: What
do these developments mean to us? How might we take advantage
of them? What threats are on the horizon that we must respond
to now if we are to turn this change into an opportunity?
While such questions are traditionally the purview of senior
management, the pace of change today requires broader participation.
Forming opportunity-spotting teams allows people from all
functional areas and all areas of the company to self-select
for participation.
Beyond merely amassing data, such teams can be helpful in
discovering hidden opportunities, and in "assaulting
assumptions" that might preclude exploration from traditional
departments. Creativity is valued in such teams, and is allowed
to flow freely. Successful innovation means more than just
hatching ideas. It means being able to move on those novel
solutions and champion them into specific results that create
tangible customer value, improve processes, and build new
opportunities. Creativity and passion are required at the
inception and during each phase along the way to deal with
bureaucracy and inertia. From the smallest improvement to
the "bet the company" mega-product, ideas depend
on people's commitment to bringing them to fruition.
Futures councils or "opportunity SWAT teams" as
they are sometimes called, won't guarantee you'll be a first
mover on any trend. They won't guarantee you'll spot discontinuities.
What they will do is provide an early warning system for imagination
and innovation and creativity and dreaming to become a part
of the fabric of the organization where none existed before.
The trick then is to keep the momentum going, to sustain the
enthusiasm.
Principle No.3 - Organizations must involve
everyone in the innovation process. Today, the vast
majority of organizations don't pay their people to innovate.
In fact, they don't even expect them to think! Nearly two
thirds of 641 managers and hourly workers surveyed by consultant
Kepner-Tregoe of Princeton, New Jersey, said their companies
don't use even half their brainpower. More than 70 percent
compared their organizations to a "slow moving truck"
blaming the condition on a failure to involve employees in
decisions and a lack of training or rewards. Many jobs have
actually been designed to eliminate the thinking component
altogether, and not just entry level jobs either. Then, in
the midst of a crisis, employees are asked to suddenly be
creative, to "think outside the box," and management
is underwhelmed by the results.
In the innovation economy, this dormant creativity must be
tapped. Unleashing people's ability to solve problems and
create opportunities becomes paramount to survival. Teaching
people how to "work the system" in an organization,
and to champion their ideas toward implemented solutions is
quickly becoming the real work of forward-looking training
departments.
A few companies have known this all along. Akio Morita, the
founding chairman of Sony, believed that a company would never
rise to its potential if all the thinking was left to management.
"Everybody in the company must contribute," Morita
wrote in his book, Made in Japan, "and for the lower-level
employees their contribution must be more than just manual
labor. We insist that all of our employees contribute their
minds."
Beyond a seldom-used suggestion system for cost-saving ideas,
most companies have no organized method for stimulating or
harvesting the good ideas of their most valuable resource,
their people. Not so at companies that are architected for
continuous, all-enterprise innovation. Some of Dana Corporation's
plants receive 3.5 ideas per month, per employee, with a 75
percent implementation rate. At Disney, a thrice-yearly Gong
Show, where anyone in the company can pitch a new concept,
is the forum where the company's retail format was first proposed
by an employee. At London-based Virgin Group, a flight attendant
who didn't like how she was treated in planning her own wedding,
that led Alisa Petchey to pitch the idea through the company's
Speak Up Program.
Not all ideas that people come up with will be useful. Many
will be redundant, self-serving, and absolutely useless. But
not to have an organized method for harvesting ideas is tantamount
to erecting a billboard at the entrance to your company announcing,
"If we had wanted your ideas, we would have asked for
them."
Principle No.4 - A company must work
constantly on improving its climate for innovation.
The word culture is generally used to describe a company's
values, traditions, priorities, and paradigms. A company's
culture may be centered on spreading its service ethic, "going
the extra mile for the customer," or its fierce commitment
to quality, or engendering loyalty to "the company way,"
while its climate may stifle innovation by fostering too much
loyalty and an unwillingness to make a mistake or take a risk.
To gauge the climate in your firm ask yourself these questions:
What happens to creative, out-of-the-box mavericks in your
company? What happens when someone fails? How many people
say to employees, "We want you to take risks, and we
want innovative ideas bubbling forth. And, by the way, we
also want you to make your numbers, and we don't want any
embarrassing failures." Unfortunately, only the latter
half of that message gets communicated. The first half falls
on deaf ears.
There are at least three possible responses to a "failure."
You can: a) cover up the failure and refuse to acknowledge
it. You can, b) acknowledge the failure, assign blame, or
c) you can acknowledge the failure, make every effort to learn
from it, and share the learning broadly. Innovative companies
are above all, learning organizations. They realize that the
degree of learning is directly related to the degree of open
acknowledgement of the failed effort, and what happens to
those associated with the "failure" says everything
about who ventures forth in the future.
Unleashing an innovative climate has little to do with sending
employees to rah-rah creativity seminars. It has more to do
with how "innovative activity" is looked upon by
management - the emphasis it is given, the role it takes in
the organization's collective conscience, and people's views
of what behaviors management genuinely expects.
Climate is the "feeling in the air" that you get
when you visit a company. That climate is created by practices,
procedures, and rewards. If the climate is favorable for innovation,
you will sense that everyone is eager for the organization's
advancement - to reach a milestone that has never been met;
in other words advancing toward a specific stretch goal, whether
it's a new product, a new business model, or opening a new
market. The organization is in a state of becoming, rather
than a state of being. It is creating the future rather than
managing the past.
The organization with a favorable climate for innovation
is one that provides the context for people to collaborate
in groups, teams, divisions, and departments without boundaries
or fear. And since innovation is really a process of problem-solving,
this informal networking can't be limited only to internal
sources. A team of researchers at Rensselaer Polytechnic Institute
(RPI) in Troy, N.Y., conducted extensive field interviews
with the teams involved in such breakthrough projects as GE's
digital X-ray, Texas Instrument's digital light projector,
GM's hybrid vehicle, IBM's silicon-germanium devices, and
DuPont's biodegradable polymer. The research found that informal
networks were critical in all 11 of the breakthrough projects.
The networks were not confined to the R&D community, but
operated between R&D and the business units, and between
R&D and outside constituents: customers, suppliers and
governmental agencies. These contacts helped give early validation
to the idea's potential and generate political and financial
support. They also helped to provide access to scarce resources,
friendly customers, and government funding.
The new century promises to bring more change, more complexity
and more competition. The expectations of customers and Wall
Street will continue to rise. But companies that pay attention
to strengthening this core competency have nothing to fear
- and everything to gain.
Robert Tucker is president of The Innovation Resource, an
innovation consulting firm based in Santa Barbara, Calif.
(www.innovationresource.com). A frequent keynote speaker at
conferences, he is the author of Driving Growth Through
Innovation: How Leading Firms Are Transforming Their Futures.
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