Thursday, August 31, 2006
UNDERPINNING OF DRIVING ORGANIC GROWTH BLOG
I am reissuing a post I did earlier to describe the basis of this blog for the many new members that attended this week's KIN meeting.
Thanks to Cargill for being great hosts and especially Dave Patchen for sharing his incredible experiences with the KIN!!!
Hello everyone and welcome to the Kellogg Innovation Network (KIN) company representatives. Our group now includes the alumni of the May Driving Organic Growth executive education program and the KIN members. We have already posted a couple of what we call innovation nuggets that have been well received.
Before going forward, I wanted to put some underpinning structure to the blog to better organize our thoughts. After much investigation, I found four critical components of a successful corporate innovation effort:
LEADERSHIP must frame the overall innovation effort; make the critical resource decisions in a transparent fashion; clear any obstacles that would impede momentum; legitimize the initiatives within the corporation; and, play a major role in setting the climate for innovation.
CORPORATE CLIMATE deals with the: cultural barriers to growth through innovation; the skills required; the incentive systems to create the right behavior; the managing systems and attitude. We have found that managing business risk is an absolutely critical component to a successful, sustainable innovation effort.
IDEAS are of course the basis for innovation. Where they come from is changing dramatically. We will discuss this thoroughly going forward. However, you will fall way short if all you do is generate ideas.
PROCESS is the final component to a successful innovation effort and we will share what different companies have tried.
Have a great weekend
Sunday, August 27, 2006
A FORMULA FOR FAILURE
Creating a corporate climate conducive to innovation is of course a critical component of the overall effort. We talked about this earlier. BUT, how do you do it? As part of the tremendous article in the July 10, 2006 edition of Business Week, a "Formula for Failure" was discussed. These are the type of things we can begin to think about to impact our Corporate Climate. Remember in my last note, change requires the full commitment and action of leadership!! I will summarize the BW article with my editorial comments.
Formalize Forums For Failure
To keep failures and the valuable lessons they offer from getting swept under the rug, carve out time for reflection. GE has recently begun sharing lessons from failures by bringing together managers whose “Imagination Breakthrough” efforts are put on the shelf.
Move The Goalposts
Innovation requires flexibility in meeting goals, since early predictions are often little more than educated guesses. Intuit’s Scott Cook even suggests that teams developing new products ignore forecasts in the early days. “For every one of our failures, we had spreadsheets that looked awesome,” he says. (My skin always crawls when I hear, after an idea is selected from a ideation session,"well, let’s create a business plan to prove the merit to management for resources". We’ll talk more later about how to manage in uncertain business environments but any serious attempt at quantification at this early stage of innovation is actually dangerous-- it locks people into a given direction far too early and sets manangement's expectations based on very uncertain data.)
Share Personal Stories
If employees hear leaders discussing their own failures, they’ll feel more comfortable talking about their own. But it’s not just the CEO’s job—front-line leaders are even more important, says Harvard Business School professor Amy Edmondson. “That person needs to be inviting, curious, and the first to say: ‘I made a mistake.’ ” (You can’t believe the intensity of the discomfort and even emotional pain I have seen in companies when people believe that something they originally thought was going to happen in a project or any business situation did not, even if the reasons were beyond their control. It is often more than just “this might affect my career” but on a much more personal level when they have to tell management they were “wrong”)
Bring In Outsiders
Outsiders can help neutralize the emotions and biases that prop up a flop. Customers can be the most valuable. After its DNA chip failed, Corning brought pharma companies in early to test its new drug-discovery technology, Epic. (One of the most powerful components of the Market Driven Growth (MDG) process that we have talked about in the past is the use of outside people throughout the innovation process.)
Prove Yourself Wrong, Not Right
The tendency for development teams is to look for supporting, rather than countervailing, evidence. “You have to reframe what you're seeking in the early days,” says Innosight’s Scott Anthony. “You’re not really seeking proof that you have the right answer. It’s more about testing to prove yourself wrong.”(It is the classic scientific method. I believe it is important for leaders to ask probing questions along these lines. If the individuals’ effort is to prove their hypothesis wrong vs. right, they will always be less defensive when faced with hard data and when a positive assessment is made, it probably will have more credibility using this methodology.)
Celebrate Smart Failures
Managers should design performance-management systems that reward risk-taking and foster a long-term view. But they should also celebrate failures that teach something new, energizing people to try again and offering them closure.
Saturday, August 26, 2006
IBM's honcho on what CEOs can do to lay the groundwork for real breakthroughs
This great article appeared in the Business Week APRIL 3, 2006 edition covering an IBM survey of CEOs and government leaders to find out what's high on their agendas. The following is an excerpt of the interview held by Steve Hamm from Business Week and IBM's Chairman Samuel J. Palmisano. It highlights the important role of leadership in driving innovation, particularly when fundamental change is required.
Innovation is a hot button for chief executives. What's driving that?
CEOs and business leaders around the world see increased competitiveness, and they see challenges in their business models going forward. They see many things commoditizing. They see that all roads lead to innovation.
Your survey found that business-model innovation has become a focus for CEOs.
People realize that you need to do innovative products. You need to have your products differentiated. But with product innovation, it's a certainty that your competition is shortly going to copy what you've done…….. With business-model innovation, though, if you can come up with a unique way of doing things, it's much tougher to react to.
Why is business-model innovation so much harder to achieve than product innovation?
It's because organizations have inherent resistance to change……. There's a lot of inherent resistance to this shift and this change. With many companies, what makes it hard to do is not necessarily setting the strategy but executing it. That's where it requires strong leadership from the CEOs as well as collaboration with groups outside of your own organization. You need to collaborate because the collaboration is so important to learning.
Is collaboration with business partners a key part of business- model innovation?
Our point of view is simple: In today's environment, with all the global opportunities that exist and these new technologies, the best way to make them unique for your own enterprise is to foster collaboration. You can do that in multiple dimensions. You can collaborate within your own organization………. In addition, you need to collaborate between companies and governments and educational institutions…….. We also started collaborating with communities of experts. It started with Linux and the open-source community, where we all come together and share in some of these areas of technology and standards
Another thing that you found in your survey is that the CEOs feel they have to personally lead the innovation campaign.
With product innovation, if you stand up on your soapbox and you cheer a little bit, that will certainly help. But the reason I think that the CEOs have to lead this is because, fundamentally, the biggest breakthroughs are a result of changing the business model and the processes and the culture. When you say the new strategy is going to be to change the business model, every CEO understands that's their job. When you talk about driving culture or management systems to change your culture, my colleagues all understand that's their job. So CEOs realize that they have to get these new types of innovation done through their own leadership.
Tuesday, August 22, 2006
If you are an alumni of our Driving Organic Growth class or attended earlier KIN sessions, you heard me teach the importance of taking risks in the right way (Option management and Discovery Driven Planning) to drive innovation. I believe the attached article is quite interesting and thought provoking:
One of the key components in corporate innovation is how executives embrace failure to allow their companies to strive for those all important breakthroughs. BusinessWeek have interviewed executives from the likes of Coca-Cola, Virgin and Intuit to find out how they “cozy up to the risk taking that innovation requires” on how they manage, embrace and communicate failure within their organizations.
Communicating the message from the top that failure is part of the innovation process has been something that E. Neville Isdell, CEO and Chairman of Coca-Cola, did at their recent annual meeting in April 2006, where he declared that “you will see some failures. As we take more risks, this is something we must accept as part of the regeneration process”. Isdell wants Coca-Cola to take bigger risks, tolerate failures and change Coke’s traditional risk-averse culture. Failure is so important to the experimental process, without it you simply aren’t learning. The key is to have intelligent failures, and preferably those that happen early and inexpensively which lead to new insights about customers. Reflecting on failure and passing that knowledge on is paramount, so many companies embarrassed by failure want to quickly forget it ever happened. In a recent celebration of failure by its marketing team, Intuit Chairman, Scott Cook, emphasized that “it’s only a failure if we fail to get the learning”.
A clear example of this in practice can be seen by Virgin Atlantic J2000 angled reclining upper class seats. Whilst such seats had existed in upper class, Virgin was the first to announce its offering to the business class. However, a year later British Airways trumped them and rolled out a truly flat bed for business class. Whilst there had been initial excitement about the J2000, some people complained about the sliding movement of the seat and general discomfort. In the end the J2000 was wildly unsuccessful and widely recognized as inferior to their principal competitor. However, Virgin entrusted their head of design, Joe Ferry, with a huge $127 million overhaul of the airline’s upper-class sears to reclaim their lost position. Their new version was a solid success and exceeded their target to increase Virgin’s business market share by 1%. This re-design saw the business-class seat leap beyond just being flat. “Flight attendants flip over the back and seat cushions to make the bed, allowing for different foam consistencies for sitting and sleeping”.
If top executives employ faith in ‘intelligent failures’, people can and will embrace risk. By noting errors on the job, not repeating them but learning from them should not only be supported but valued. This is a great read on how to manage failure within innovation.
Saturday, August 19, 2006
Hello everyone and welcome to the Kellogg Innovation Network (KIN) company representatives. Our group now includes the alumni of the May “Driving Organic Growth” executive education program and the KIN members.
We have already posted a couple of what we call “innovation nuggets” that have been well received. Before going forward, I wanted to put some underpinning structure to the blog to better organize our thoughts. After much investigation, I found four critical components of a successful corporate innovation effort:
Leadership must foster a bottoms-up stream of innovation opportunities….and to commit top down to prioritize innovation projects
Geoffrey Moore, Dealing with Darwin
Leaders must: frame the overall innovation effort; make the critical resource decisions in a transparent fashion; clear any obstacles that would impede momentum; legitimize the initiatives within the corporation; and, play a major role in setting the climate for innovation.
GE will now have to square its traditional Six Sigma metrics, which are all about control, with its new emphasis on innovation, which is more about managing risk
Business Week, The World’s Most Innovative Companies
This critical area deals with the: cultural barriers to growth through innovation; the skills required; the incentive systems to create the right behavior; the managing systems and attitude. We have found that managing business risk is an absolutely critical component to a successful, sustainable innovation effort.
Companies are increasing rethinking the fundamental ways in which they generate ideas and bring them to market – harnessing external ideas while leveraging their in-house R&D outside their current operations.
Henry W. Chesbrough, Open Innovation
Innovation of course starts with ideas. Where they come from is changing dramatically. We will discuss this thoroughly going forward. However, you will fall way short if all you do is generate ideas…..
Process makes" innovation routine, not random; central, not marginal; exciting, not scary
This is the final component to a successful innovation effort and we will share what different companies have tried.
I have a great visual for this model but could not paste it to the blog. I will send it to you separately via e-mail.
Have a great weekend!
Thursday, August 10, 2006
This is a great note on Business Week's assessment of what Chief Innovation officers-- a new title seems to be emerging -- do in their corporation:
Champions Of Innovation - Have you ever wondered what ÂInnovation ChampionsÂ do, who they are, and what some of their key innovation messages are?Well wonder no more. Business Week have surveyed a group of 25 ÂChampions of InnovationÂ or as they are becoming more commonly know, Chief Innovation Officers (CIOs), who in the past three years have increased their numbers four-fold in numbers.
What are they doing?
These CIOs are charged with making Âinnovation routine, not random; central, not marginal; exciting, not scary. They educate, inspire, cajole, hire, bribe, punish, build -- all to transform their companies' culturesÂ.
Why are these CIOÂs charged with such a mission?
The answer is fairly straightforward. ÂIn an era when Six Sigma controls no longer guarantee competitive advantage, when outsourcing to China and India is universal, when creeping commoditization of products, services, and information hammers prices, innovation is the new currency of competition. It is the key to organic growth, the lever to widen profit margins, the Holy Grail of 21st century businessÂ
.How do they achieve this mission?
Whilst there is no single uniform description for these CIOs, they do possess common traits that help them achieve their mission. Firstly they are customer focused Â in its broader sense (although the article describes this more specifically as design and user-friendliness). Secondly, Âthey derive their clout from the topÂ i.e. the CEO is fully supportive and behind innovation. Thirdly, 70 percent of them are women, although how indicative this sample is of all the ÂCIOsÂ and if women are more creative than men is not verified.
Monday, August 07, 2006
As the first of many brief thought provocations on driving organic growth through innovation, I would like to excerpt from a Business Weeks article on "How Whirlpool Defines Innovation" in their March 6, 2006 edition. The article was an interview with Nancy Snyder.
The challenge: In August, 1999, Nancy T. Snyder got a flattering -- and frightening -- assignment from David R. Whitwam, the chairman and chief executive of Whirlpool (WHR ). Whitwam wanted to make the market leader in big-ticket appliances No. 1 in innovation as well, by soliciting ideas from everywhere and everyone in the 61,000-employee enterprise. And he wanted Snyder, director of strategy deployment, to make it happen. Snyder recalls having two reactions after her one-on-one with the boss: "excited and overwhelmed."
Measuring success in innovation: One of the things we struggled with a lot is how do you measure success. We counted the number of people we trained. We did that for a year, but that doesn't tell you anything. Then, we had a defining moment. We were in an executive committee, and it sounds like it should have been obvious, but it wasn't. One of our committee members said, "What if we asked every individual at Whirlpool: "Have you been trained in innovation? Can you use it in your job? Has it changed your job?" ............We set a goal every year, and the goal this year is $1 billion in revenue from innovation. The first couple of years, we didn't know how to set the goal. Should it be $1 million? Should it be $50 million? It took us a couple of years to get a baseline, to begin to understand what a real goal would be and what a stretch goal would be. ?"
Importance of what we called the Project Selection Criteria:It had to create a competitive advantage. It had to be unique and differentiating. And it had to create shareholder value. We worked with those definitions for three years, and then we realized they weren't quite right. It's hard for any one thing to create a competitive advantage by itself and be sustainable. You have to stay ahead of the competition. If you have a cadence of innovations that keeps a product fresh and always improving -- a migration path -- that makes it sustainable. So now we say if we're going to put any money in an innovation project, it has to sit on a migration path, it has to be something that the customer really wants, and it's got to return an above-average profit. ........Now every project that comes forward has to meet the innovation criteria or we won't fund it.
Incentives: A third of your pay, if you're a senior leader, is tied directly to what comes out of the innovation pipeline. And that's been in place for three years. That was a tipping point for us on innovation.
How to train the organization: ........ we trained these people called I-mentors who are kind of like Six Sigma black belts. They have real jobs, but they've also had special training in how to facilitate innovation projects and help people with their idea. We have nearly 600 of them around the world, so it's very likely that in your location or the department next to you there's an I-mentor who you can talk to.