THE INNOVATION RADAR

One of the important things we drive in the Market Driven Growth process is that a great product or service in itself does not mean success. A company has to build an entire Business System around its offering to make it work. We use the methodology developed by Sawhney and Wolcott to "force" businesses to think through all the major issuse using the Innovation Radar ("....business innovation is far broader in scope than product or technological innovation. In fact, a company can innovate along any of 12 different dimensions with respect to its (1) offerings, (2) platform, (3) solutions, (4) customers, (5) customer experience, (6) value capture, (7) processes, (8) organization, (9) supply chain, (10) presence, (11) networking, and (12) brand" http://sloanreview.mit.edu/smr/issue/2006/spring/14/).

Microsoft's challenge in combating Apple's iPod touches on issues in all the axes. This example talks about four of them.

This first artcile presented below appeared in July of this year prior to the formal Zune announcement. The second article was published yesterday summarizing the initial reaction of the market to Zune.

CHALLENGES FACING A NEWCOMER -- THE ZUNE CHALLENGE EMERGIC.org - July 24, 2006 Microsoft's Zune News.com writes about the new device and service which will rival iPod and iTunes: Michael Gartenberg

........The initial Zune device will have Wi-Fi and use a hard drive to store music, Microsoft said. Stephenson's statement also lent some credence to speculation that the company's player will use wireless connectivity to share music with other Zune devices.

So what's the challenge? Essentially there are three things.

Creating a technically competent challenger (Offering) - Arguably this is the easiest thing for them to do. Apple's shown the way on what features the market wants. Less obvious are how Microsoft will differentiate with features like WiFi, that few mainstream consumers want and serve as a something that not only boosts for the bill of materials but also kills important features like battery life. Good news is the focus is on music and video.

Creating a lifestyle device (Brand and Customer Experience) - Microsoft is clearly going to face a battle here. It's good that they're building a unique brand and following the Xbox tradition, distancing themselves somewhat from Microsoft identity but that's not enough. Zune isn't a bad name. It's going to be hard for them to create the same level of cachet that Apple has with the iPod.

Creating a platform(Platform)- iPod is more than a single device. It's a platform in and of itself with a whole eco system of cases, car kits, speakers and docks. No doubt that MSFT will work hard to make sure that they fill some of the gap directly with first party stuff, but this is one area where consumer choice goes a long way in making the platform a success.

Here is what was in yesterday's WSJ..... Microsoft's ZuneFalls Off Sales PaceFor Media Players By CARMEN FLEETWOODNovember 28, 2006; WST, Page B2

Top 10 selling list for electronics yesterday, seven of the 10 products were digital media players. Nowhere did the Microsoft Corp. or Zune names appear. "That's a pretty good indicator of consumer interest," Michael Gartenberg of industry group Jupiter Research said yesterday, one of the busiest days of the year with online shoppers.

The 30-gigabyte Zune player from Microsoft, which retails for $249, was on the Top 10 list of Amazon, the largest Internet retailer, for several days after its release on Nov. 14 before dropping off. But yesterday, the most popular model of the Zune, the black version, was at No. 76. The Top 10 digital media players included six iPods from top-seller Apple Computer Inc. and one MP3 player from SanDisk Corp. The 30-gigabyte iPod has a $249 list price and ranked No. 2 at one point yesterday. "The product [Zune] wasn't particularly attractive. At the end of the day, you put it on a shelf and it just didn't compare," said Rob Enderle of research firm Enderle Group.

Microsoft has noted the Herculean effort it would take to overcome the lead Apple has built up in the digital media market in five years since the introduction of the iPod. Microsoft is trying to build up a total ecosystem with the product and the Zune Marketplace music Web site in order to compete with Apple and its iTunes store. Sales of Zune in the first week after the Nov. 14 launch were "exactly within our expectations," a Microsoft spokeswoman said. She added that she is still awaiting information for holiday weekend sales.

Analysts say the Zune is more likely to snag market share from other digital media players instead of Apple this holiday season. ........... Zune received accolades for its built-in wireless capability and ability to share music with other Zune users for three plays, something not available in the iPod . A larger screen than available on the iPod and a built-in FM radio were noted as positives for the Zune, which is also available in white and brown (Some Offering features seem sound). Critics found the Zune Marketplace, where Zune owners must buy their music, confusing. Also, the Zune is incompatible with Apple's iTunes store (Customer experince is critical). The Zune doesn't support podcast audio programs nor can it transfer television and video programs from Microsoft's Media Center. Others have faulted the lack of videos available on the Zune Marketplace site, and the device's heavier weight and shorter battery life to an equivalent iPod were negatives to consumers seeking to purchase an MP3 player.(These are some real negatives. What good is a larger screen if you do not have videos).

The importance of looking at the whole system is critical!!!!

Recently, Business Week Online posted an article highlighting the results of a Booz Allen Hamilton study entitled, "Global Innovation 1,000." The article is worth reviewing; however, the most telling lesson from the article is that neither the smart people at Booz Allen (and they are quite sophisticated) nor the well-informed editors at Business Week noted that both the study and their article focus specifically, and to a fault, on R&D investments, patents and innovation. This myopia is the source of the unsatisfactory results. See the article at:

http://www.businessweek.com/innovate/content/nov2006/id20061114_428152.htm?chan=innovation_innovation+%2B+design_top+stories

The study offers another example of what we've been saying for a few years now-- that innovation is about more than technology, products and R&D. Moreover, it validates that VERY few firms, people, consultancies, researchers, journalists, policy-makers 'get it'.

The results of the study show little to no correlation between R&D spending and corporate performance, or even innovation performance along some metrics like patent output. This comes as no suprise to us, nor to all of our Organic Growth alumni. We know at least a few reasons why R&D spend is not a good predictor of innovation success. Ultimately, innovation requires the development of complete business systems, based on offerings with solid value propositions that add real value for which customers are willing to pay. R&D plays a role in this equation, but it is by no means the lead. In fact, in many highly innovative companies, traditional R&D plays a limited to even non-existent role in driving success through innovation. The fact that the Booz Allen study failed to account for these other factors in its study design provides an explanation for why the study resolved the way it did. Even the researchers' apparent confusion over these results becomes much clearer in this light.

The Booz Allen analysis of the study appears solid, though narrow in focus, as the study design itself appears narrow. At the end of the article, the author shares some of the open questions regarding how to make innovation work. These relate to integration versus separation from the core businesses for innovation initiatives.

We believe our Corporate Entrepreneurship research offers solid answers to some of these questions. You'll hear more in this regard over the next few months.


To the Future, Robert C. Wolcott

A Hospital RacesTo Learn LessonsOf Ferrari Pit Stop Auto Crew Teaches SurgeonsSmall Errors Can Add UpOn the Track, or in the ICU
Dr. McEwan as 'Lollipop Man'
By GAUTAM NAIK, WSJ November 14, 2006; Page A1

Our Driving Organic Growth executive education class was a great success! The participants again marveled of how we integrated Kellogg’s intellectual capital with the market proven process Market Driven Growth. They reinforced the power of coming to the class in teams from the same company as they developed their own Growth Initiative Journal, a tool designed to apply the class lessons to their own, immediate growth challenges. The class in May (14 to 17th) is starting to fill up!

As a pure marketing effort to the KIN members who have not attended the course, here are a few quotes that we were given permission to replicate...

“At last, a practical approach to growing innovation cultures within our organizations! Real tools coupled with keen insights presented by world-class practitioners. This is a high-water mark in executive education!” – Director of Strategic Planning, Raytheon

“This was an excellent program that married the rich experience of a world class practitioner with the intellectual power of top notch academics. A winning combination.” -- Partner, RPOptions Management Consultants

“This class helped create a process by which to identify, prioritize, develop and grow new business opportunities in a way more likely to integrate into my company.” -- GM & DVP, Automatic Data Processing

One of the students pointed out this article that is a great example of getting ideas from very different sources...........

LONDON -- After surgeons completed a six-hour operation to fix the hole in a boy's heart, Angus McEwan supervised one of the more dangerous phases of the procedure: transferring the fragile three-year-old from surgery to the intensive care unit.

Thousands of such "handoffs" occur in hospitals every day, and devastating mistakes can happen during them. This one went off without a hitch, thanks to pit-stop techniques of the Ferrari race-car team.

"It was smooth. We didn't miss anything," said Dr. McEwan, a senior anesthesiologist at Great Ormond Street Hospital for Children. His role as leader of the handoff was partly modeled after Ferrari's "lollipop man," who uses a large paddle to direct drivers to the pit.

In one of the more unlikely collaborations of modern medicine, Britain's largest children's hospital has revamped its patient handoff techniques by copying the choreographed pit stops of Italy's Formula One Ferrari racing team. The hospital project has been in place for two years and has already helped reduce the number of mishaps.
The challenge of moving a patient to another unit, or to a new team during a shift change, is an old one. In 1995, one man in Florida had the wrong leg amputated after a flubbed handoff. "If you transfer a patient to the ICU after surgery and the ventilator isn't ready, you're really riding on the edge" of patient safety, says Allan Goldman, head of the pediatric intensive care unit at Great Ormond Street Hospital and a chief architect of the hospital's collaboration with Ferrari.
A 2005 study found that nearly 70% of preventable hospital mishaps occurred because of communication problems, and other studies have shown that at least half of such breakdowns occur during handoffs………….

One Sunday in 2003, after a particularly tough day in the operating theater, Dr. Goldman and surgeon Martin Elliot slumped before a TV set and watched a Formula One race unfold. Both were racing fans, and they noticed striking similarities between patient handovers at their hospital and the interchange of tasks at a racing pit stop. But while a 20-member crew could switch a car's tires, adjust its front wing, clean the air vents and send the car roaring off in seven seconds, hospital handovers seemed downright clunky by comparison.

The duo invited members of McLaren, a British team that fields race cars in Formula One contests, to provide insights into pit-stop maneuvers. Armed with videos and slides, the racing team described how they used a human-factors expert to study the way their pit crews performed. They also explained how their system for recording errors stressed the small ones that might go unnoticed, not the big ones that everyone knew about.

That point struck a chord with Dr. de Leval. He immediately saw that pit-stop handovers were successful precisely because of an obsession with tiny mistakes, a conclusion similar to the one he had reached in his 2000 paper about arterial-switch operations…………..

In early 2005, Dr. Elliot, Dr. Goldman and Mr. Catchpole traveled to Ferrari's headquarters in Maranello, Italy, and sat down with Nigel Stepney, the racing team's technical director. As a test car roared around a nearby track, the visitors played a video of a hospital handover and described the process in pictures.

The Ferrari man wasn't impressed. "In fact, he was amazed" at how clumsy and informal the hospital handover process appeared to be, recalls Mr. Catchpole, now a researcher at Oxford University.

In that meeting, Mr. Stepney described how each member of the Ferrari crew is required to do a specific job, in a specific sequence, and usually in silence. By contrast, he noted, the hospital handover was often chaotic. Several conversations between nurses and doctors went on at once. Meanwhile, different members of the team disconnected or reconnected equipment to a patient, but in no particular order.

In a Formula One race, the "lollipop man" with a paddle ushers the car in and signals the driver when it's safe to go. But in the hospital setting, it wasn't always clear who was in charge. Though the anesthesiologist had nominal responsibility to take the lead during a handover, sometimes the surgeon assumed that role -- or no one at all.

The crew at Ferrari trained for the worst contingencies. "If Michael Schumacher comes in five laps early because it's raining and he wants wet-weather tires, they're prepared," says Mr. Catchpole, referring to the Ferrari driver and seven-time world champion, who recently retired. The hospital team dealt with problems as they came up…………
Back in London, Dr. Goldman and his colleagues began to incorp

orate Ferrari's lessons, along with advice from two jumbo-jet pilots, into the hospital handover process. They wrote up a seven-page protocol describing every step in the procedure. Between December 2003 and December 2005, they also did a careful study to see if those changes made any real difference to patient safety………

After the changes, the average number of technical errors per handover fell 42% and "information handover omissions" fell 49%. It also took slightly less time to execute each handover, though, unlike the Ferrari team, the doctors weren't trying to speed up their process.

IBM to Fund Ideas Hatched in ContestWith $100 Million
By JASON DEAN WSJ, November 15, 2006; Page B10
BEIJING

A great example of open innovation. My challenge to all of you is why couldn't you do something like this at a scale approprite to your company.

Toby, do you have a reaction???

International Business Machines Corp. plans to invest $100 million over the next two years to fund business ideas generated by a world-wide innovation contest, Chairman and Chief Executive Samuel Palmisano said on a trip to Beijing.

The contest, which IBM called "InnovationJam," involved contributions from 150,000 people from 104 countries, including employees of IBM and 67 of its client companies. From the 46,000 ideas submitted, IBM will invest the $100 million to develop applications in 10 areas, including real-time translation services, three-dimensional Internet technology and electronic health-record systems.

Mr. Palmisano made the announcement at a meeting of IBM's employees in China, where the technology-services company has a staff of 8,300.

Michael Porter Asks, and Answers: Why Do Good Managers Set Bad Strategies? Published: November 01, 2006 in Knowledge@Wharton

Some great insights from the master……

Errors in corporate strategy are often self-inflicted, and a singular focus on shareholder value is the "Bermuda Triangle" of strategy, according to Michael E. Porter, director of Harvard's Institute for Strategy and Competitiveness. These were two of the takeaways from a recent talk by Porter -- titled "Why Do Good Managers Set Bad Strategies?" -- offered as part of Wharton's SEI Center Distinguished Lecture Series. During his remarks, Porter stressed that managers get into trouble when they attempt to compete head-on with other companies. No one wins that kind of struggle, he said. Instead, managers need to develop a clear strategy around their company's unique place in the market. When Porter started out studying strategy, he believed most strategic errors were caused by external factors, such as consumer trends or technological change. "But I have come to the realization after 25 to 30 years that many, if not most, strategic errors come from within. The company does it to itself."

Destructive Competition

Bad strategy often stems from the way managers think about competition, he noted. Many companies set out to be the best in their industry, and then the best in every aspect of business, from marketing to supply chain to product development. The problem with that way of thinking is there is no best company in any industry. "What is the best car?" he asked. "It depends on who is using it. It depends on what it's being used for. It depends on the budget."

Managers who think there is one best company and one best set of processes set themselves up for destructive competition. "The worst error is to compete with your competition on the same things," Porter said. "That only leads to escalation, which leads to lower prices or higher costs unless the competitor is inept." Companies should strive to be unique, he added. Managers should be asking, "How can you deliver a unique value to meet an important set of needs for an important set of customers?"

Another mistake managers make is relying on a flawed definition of strategy, said Porter. "'Strategy' is a word that gets used in so many ways with so many meanings that" it can end up being meaningless. Often corporate executives will confuse strategy with aspiration. For example, a company that proclaims its strategy is to become a technological leader or to consolidate the industry has not described a strategy, but a goal. "Strategy has to do with what will make you unique," Porter noted. Companies also make the mistake of confusing strategy with an action, such as a merger or outsourcing. "Is that a strategy? No. It doesn't tell what unique position you will occupy."

A company's definition of strategy is important, he said, because it predefines choices that will shape decisions and actions the company takes. Vision statements and mission statements should not be confused with strategy. Companies may spend months negotiating every word, and the results may be valuable as a corporate statement of purpose, but they do not substitute for strategy.

In the last 10 years or so, Porter added, companies have become increasingly confused about corporate goals. The only goal that makes sense is for companies to earn a superior return on invested capital because that is the only goal that aligns with economic value. Recently, companies have developed "flaky metrics of profitability," he said, pointing to amortization of good will as an example. Some of these measures began as a way for managers to stay a step ahead of the demands of Wall Street. "What starts as a game for capital markets then starts to confuse the managers themselves. They [then] make decisions that are not based on fundamental economics."

Porter said the "Bermuda Triangle of strategy" is confusion over economic performance and shareholder value. "We have had this horrendous decade where people thought the goal of a company is shareholder value. Shareholder value is a result. Shareholder value comes from creating superior economic performance."

To think that stock price on any one day, or at any one minute, is an accurate reflection of true economic value is dangerous, he noted. Research shows companies can be undervalued for years. Conversely, during the Internet bubble, managers whose motivation and compensation were tied to stock price began to believe and act as if the share price determined the value of the company. Managers are now beginning to understand the goal of their companies is to create superior economic performance that will be reflected in financial results and eventually the stock price. "We know there's a lag and it's ugly. But it's important that a good manager understands what the real goal is -- not spend time pleasing the shareholders."

Corporate strategy cannot be done without strong quantitative analysis, said Porter, adding that each year students take his strategy course thinking they will have at least one class in which they don't have to worry about numbers. Not true. "Any good strategy choice makes the connection between the income and the balance sheet."

The five founding principles that drive innovation
By Jonathan Schwartz, chief executive officer and president of Sun Microsystems.
Published: July 12 2004, Financial Times

I would like to welcome the soon –to- be alumni of the November 12 executive education class on Driving Organic Growth (this class was sold out and the scheduled May class is filling up). Please look at the blog site and view the August 31 posting to better undertand how our blog is organized

I think this is a great article with excellent insights.....

Innovation is the key to survival in this ultra-competitive and remarkably flat global economy. It drives profits and improves the human experience when it is done correctly. But true innovation is precious and elusive. Anyone can throw money around wildly and many companies do just that. But how do you get it to pay off?

The answer: a commitment to innovation that extends beyond the company's research and development budgets to include every person, practice and policy within the organization. True innovation – the kind that lasts and delivers tangible results – comes from channeling inspiration and creativity as often as it does from any R&D lab.

A recent analysis of the top 1,000 global R&D spenders by business consultant Booz Allen Hamilton found that, with few exceptions, there is no statistically significant advantage to exorbitant R&D spending. The conclusion? It is the process of managing the investment, not the expenditure alone that matters. Getting there, however, requires significant corporate soul-searching. You might have the most gifted technical minds on the planet. But it is successful management of that talent that determines whether your innovation investments flow to the bottom line or go down the drain. And it takes discipline and character to put your organization under an internal microscope, and courage and conviction to make changes to your business model and technology roadmap. With business cycles that are increasingly difficult to predict, harnessing innovation and managing genius has become an art form.

The global economy places greater value on economies of speed, scope and skill rather than simply economies of scale. This means innovation must be achieved by different departments and business units within the same organization working in parallel rather than in isolation as they often do in large corporations. It also means looking outside your organization to partners, suppliers and customers for new and innovative ideas. Breakthroughs most often occur when a variety of people with disparate interests and backgrounds focus on a shared problem or process.

At Sun Microsystems, we made a conscious decision to sustain our R&D focus – to the chagrin of many observers – while many of our competitors made cuts. We knew that the cornerstone of our recovery would be our ability to innovate. We also recognized this would not just require a financial commitment but also the discipline to manage, cultivate and, in some cases, make tough decisions to eliminate projects. And, perhaps more importantly, we channeled investments in parallel with our corporate DNA.

Here are some principles on which we built our innovation strategy: first, hire the best and let them lead you. Build and encourage a culture of leadership regardless of title or department and ensure there is communication and interaction between leaders of different departments and product groups.

Second, share. Create communities with partners, customers and business groups that allow collaboration and open innovation. After all, this is the "participation age". Third, create small groups and give them autonomy. Steering committees do not work. Create task forces with the ability to identify and create projects that matter. Bring in different voices in the brainstorming phase. If the same people are consistently bringing new ideas to the table, you probably are not being as innovative as you could be.

Fourth, allow public debate. Transparency of ideas and debate is always healthy but you have to know when the debate should end. Then move quickly to focus resources towards achieving the goals. Finally, have the courage to make hard decisions. At Sun, this was to invest when others were cutting and to drive increased focus in our engineering operations. It also meant querying what we were accepting as fact. What did we, as a company, believe implicitly?

These are the tough questions every CEO and executive team should ask and answer if it expects to become a truly innovative organization. In times of adversity, there is always a moment when good leaders step up and modernize products or processes while holding firm to the core principles that made the company relevant and successful in the first place.

Great companies and leaders pursue projects with dramatic potential, knowing that some will thrive and some will fall short. Innovation is a messy business. But a few dramatic successes can change the world.