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Sparking Growth
Systematically
by Robert B. Tucker
How to turn innovation, often viewed as a haphazard
occurrence, into a discipline.
How will you drive growth in your company now that all the
bubbles have burst?
Take, for example, acquisition, that popular strategic ploy
of the late '90s. It turns out that the staggering prices
paid to capture other firms often lower growth rates rather
than increase them. Just 23% of acquisitions earn back their
cost of capital, concludes a McKinsey study, which looked
at deals made by 116 companies over an 11-year period.
Tried-and-true methods such as suggestion systems that promote
cost-saving ideas and continuous-improvement task forces that
look to make processes more efficient can certainly improve
your bottom line. But they won't help you achieve top-line
growth. Smoke-and-mirrors tactics will only fool the market
for so long. The solution? Innovation.
With all the hype about innovation during the bubble years,
you'd think that companies were doing a lot of it. But don't
be deceived by the billions they poured into new technology.
Most firms have been focused almost exclusively on incremental
improvements and line extensions. Valuable as these efforts
are, their benefits rarely go beyond the intermediate term.
The long-term benefits that come from game-changing breakthroughs,
however, require more work: unconventional methods of seeking
out the unmet and unarticulated needs of customers, faster
prototyping of ideas, new ways of funding ventures, and compensation
systems that provide incentives to increase the revenue from
new products and services.
With top-line growth opportunities ever harder to find and
sustain, companies can no longer get by with a partial or
episodic commitment to innovation. In a three-year study,
my associates and I were allowed behind the scenes in companies
like EDS, Citibank, Borg-Warner, Royal Dutch/Shell, BMW, and
others for a look at what amounts to a fundamental redesign
of the innovation process.
Although each company's innovation overhaul has its distinctive
features, they all encourage ideas from everywhere in the
organization, not just the new-product development or strategic-planning
departments. Moreover, to ensure that high-potential notions
don't get lost, these initiatives take a systemic approach
to idea management. Let's look at three of them.
The top-line, all-enterprise approach.
Appleton Papers, based in Appleton, Wisc., found itself in
the unenviable position of being the world's leading producer
of a product fewer and fewer customers want: carbonless paper,
the kind used in forms that need to be filled out in triplicate.
The company already had a suggestion program for cost-savings
ideas, but it desperately needed ideas that would replace
revenue. So it created the GO Process (short for "growth
opportunities"), which regularly solicits ideas from
everybody in the company.
"In one year we've gotten over 700 new product ideas
from our 2,500 employees," says Dennis Hultgren, Appleton's
vice president. One of these is a new digital paper product
that has been launched in Germany. "What we've learned
is that it's important to bring everybody in on [the search]."
Ideas suggested by employees are fed into nine cross-functional
teams, each led by a senior manager "spoke owner,"
who is in charge of championing the best ideas to make sure
they become out-the-door new products. The teams meet several
times a month to brainstorm, and share insights gleaned from
investigative visits to other companies. Once a month, each
team's best ideas are presented to Appleton's executive committee,
which evaluates each submission using a scorecard that gives
detailed feedback to the teams about why the product idea
does or doesn't fit the company's objectives or available
resources.
The innovation team model. The
downside of the all-enterprise system is that, if implemented
without sufficient training, it can lead to a bottleneck in
sifting, sorting, and reaching consensus on which of the myriad
ideas suggested to pursue. The innovation team model attempts
to solve this problem by creating a companywide network of
people with demonstrated skills in innovation and assigning
them the responsibility not only of finding new ideas but
of choosing the best ones and bringing them to market as well.
At Whirlpool Corporation, of Benton Harbor, MI, growth in
the late 1990s had come to a standstill. Profits were falling,
the stock price was at an all-time low, and another cyclical
downturn was on the horizon. Management had already tried
the usual cost-cutting measures, including the decision to
trim 10%of the company's 60,000 workers. But it was a breakthrough
washing machine from arch-competitor Maytag that caused executives
at Whirlpool to act.
The company formed a 75-person, cross-functional team and
charged it with scouring every region and functional area
of the firm for ideas that could jumpstart new revenue growth.
Out of an initial 1,100 ideas, the team identified 11 to investigate
further and finally decided on six to actively pursue. One
of the six was a new-to-the-world appliance that makes clothes
ready to wear by smoothing away wrinkles and cleaning away
odors.
Another idea involved the development of a new channel to
sell it newfangled kitchen appliances to time-starved Baby
Boomers. Taking a cue from Tupperware's "party"
distribution system, Whirlpool contracts with chefs and culinary-school
grads to host cooking-class dinner parties in customers' homes.
The chef brings all the food and uses Whirlpool's latest cooking
appliances to prepare the meal, and takes product orders at
the end of the event.
The innovation team approach gives Whirlpool a continuous,
sustainable vehicle for innovation that invigorates its existing
methods of discovery and idea development. "We had this
internal market of people we weren't tapping into," explains
Nancy Snyder, corporate vice president. "We wanted to
get rid of the 'great man' theory that only one person--the
CEO or people close to him--is responsible for innovation."
The innovation catalyst model.
In this model, ideas don't leave the division or business
unit to be developed elsewhere-at headquarters, say, or in
a skunkworks or incubator. Citigroup's Citibank division uses
the innovation catalyst model to drive organic growth and
capitalize on synergies created by a string of acquisitions.
The effort is led by the chief country officer, working with
a full-time "innovation catalyst," who expedites
the process.
Many of the ideas come from structured ideation sessions
with clients. Members of a Citibank senior team spend a day
with their counterparts from a particular client. A facilitator
focuses the brainstorming on present and emerging needs, marketplace
changes, and customer service issues. To ensure the flow of
new-product ideas, the innovation catalysts work closely with
"magnet teams," locally empowered, cross-functional
groups of senior executives that regularly meet to review
ideas. The catalysts don't propose new ideas; instead they
help the local managers prepare a case for their ideas.
In one Asian country, the innovation catalyst model has worked
so well that the magnet team meets every week to review and
prioritize ideas that have been proposed. And in Citibank's
Trinidad bank, the model was responsible for 30% of the total
revenues during a recent year.
Idea management systems don't replace traditional departments
and processes involved in new services, products, or strategies-they
serve as an adjunct to them. In addition, they create broader
participation by making the hunt for new growth opportunities
every department's business, rather than the province of a
select few. And most important of all, they provide a framework
that can help your firm turn innovation into an enterprise-wide
discipline-and a sustainable process that drives growth in
good times and bad.
Robert B. Tucker is the author of Driving Growth Through
Innovation: How Leading Firms Are Transforming Their Futures
(Berrett-Koehler, 2002). A frequent keynote speaker, he is
also president of The Innovation Resource, a consulting firm
based in Santa Barbara, CA. For more information visit www.innovationresource.com
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