creating a culture of innovation

nurturing successful business innovation

AUGUST 2010

Innovation. According to Wikepedia, innova­tion is defined as “a change in the thought process for doing something, or the useful ap­plication of new inventions or discoveries.” In different industries it implies different meanings and thought processes. It has become the buzzword for global companies seeking new strategies as a result of the economic crises. Companies both small and large are beginning to understand a new truth in understanding that by implementing effective innovation strategies beyond product and price or incre­mental innovation, businesses can attract a host of extra clients but most importantly gen­erate innovative new revenue streams for long­term growth.

Innovation in the 21st century means much more than introducing new products. Innova­tion today encompasses business reinvention and introducing new products and services that

fill a void of customer needs that otherwise had gone unfulfilled. It focuses on editing and carrying out the right ideas and introducing them to market in an expedited manner. A question all businesses should be asking is “are we currently embracing innovation as a part of our business strategy to drive growth and improve our chances of market share dominance. And if not, what are the obstacles preventing us from moving forward in explor­ing innovation as a catalyst for creating new business strategies?”

It’s no surprise that many businesses shy away from investing in innovation during a re­cession with the common misperception that in order to innovate, millions of dollars must be spent in order to generate new outlets of innovative business options. For those com­panies willing to view a downturn as a catalyst for innovation and a prime opportunity to

Helmut Albrecht and Andy Martin

Prepared by

AUGUST 2010

focus on generating new business strategies, the payoff can far exceed the company’s ex­pectations. Few consumers recall that the IPod was launched only a month and a half after the September 11, 2001 attacks. And yet another brand that was launched during times of economic stress. Federal Express was launched nine months prior to the 1973 oil crisis, creating a new industry amidst eco­nomic disorder. Companies like Apple, Dis­ney, and McDonald’s are prime examples of how innovation in an economic downturn can produce iconic results in different industries. The notion of innovating as a result of crisis or a downturn is no secret to Bud Paxson, co­founder of the Home Shopping Network HSN who began his career as the owner of an AM radio station and ultimately created one of the most successful and innovative retail markets. A concept that has been repli­cated worldwide since its inception. During a recent executive briefing, Paxson provided details of how HSN came to be, a creative response to an impossible dilemma which ultimately led to the creation of HSN “pioneering the concept of the viewer shop­ping for items in the comfort of their own home.” Upon facing a difficult commercial dilemma of finding a way to sell 112 electric can open­ers that he had received from a client who had refused to pay for his airtime, Paxson was presented with the opportunity to create an entirely new and innovative category of retail commerce. He ultimately solved his ini­tial dilemma which was to make his next payroll. He encourages businesses to view the recession as a time to outthink their com­petition, gain an increased market share, and emerge from the economic tunnel stronger,

with a greater brand presence and a growing tribe of loyal customers and clients. So how can you nurture a smooth and effective inno­vation environment that will not break the bank, but be impactful?

Common Pitfalls & Mistakes

One of the most important things companies need to learn and learn quickly during an inno­vation process is the ability to fail effectively. This may sound like an oxymoron but wouldn’t you prefer to rapidly identify poor innovation ideas, rather than invest months or even years on development, branding and marketing only to find that there is no niche for your product, or a firm elsewhere has developed the same idea faster, cheaper and already introduced it to market?

“Intelligent failures ­­ those that happen early and inexpensively and that contribute new in­

sights about your custom­ers ­­ should be more than

just tolerable. They

should be encouraged.”

Business Week

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Steps should be put in place in order to identify new products or processes that will likely be successful, and most importantly eliminate rapidly those that will not. So, what are the most common mistakes firms make during this process that lead to the following statistics:

An estimated 46 percent of all resources allocated to product de-velopment and commercialization by US firms are spent on prod-ucts that are cancelled or fail to yield an adequate financial re-

turn.

Less than 10 percent of proposed innovations reach the target mar-

ket.

Only 1 out of every 4 projects that enter development – make it

to market.

Despite research and planning, at least 1 of every 3 products

fail at launch.

Less than 10 percent of new products succeed in the market-

place.

In many cases management turns to either option­narrowing or rule following. They either apply logic to define and narrow down a seemingly complete set of options or they fol­low a formula of behaviors that have proven successful in the past. However, both ap­proaches are ineffective at delivering truly in­novative strategies.

To truly introduce innovation to business strategies, companies need to learn from in­novative thinkers from other domains, such as chess, military, and athletics. Truly creative strategists abandon logical approaches and utilize time­tested patterns such as:

Partner with someone unexpected

Respond quickly

to market opportunities

Lock up resources

Join forces with an ally in such a way that it

forces your competitor to compete with you in more than one area of business

Introduce a new piece to the game board when the direct approach is ineffective

Combine & coordinate

independent elements within your en-vironment to orchestrate much greater

power

Embrace ideas that others may abandon

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Unfortunately, it is all too easy to rush forward into an innovation initiative without applying much thought to the best approach to leverage your firms’ managerial, time and financial commit­ment in order to reduce risk. Though many businesses state their commitment to innovation, it is easy for their innovation attempts to fail for a number of reasons. In addition to making sure that you have agreed upon a challenge among your leadership team, companies should take into careful consideration the following common innovation mistakes:

If your firms’ business culture does not honor ideas and support risk­taking, innovation will be stifled even before it reaches the drawing board or enters upon the initiation phase. Business culture can certainly change, although it is a slow yet es­sential process. Agreement from the highest levels of management, effec­tively communicated to subordinates and team members can facilitate the process a company must undergo in order to gradually change the internal culture.

An idea­management system is essential in effectively moving innova­tive ideas towards the development, modification and refinement phases when applicable.

Furthermore, it is equally important to move ideas from the innovation funnel into the ‘non­viable’ list and to continue moving forward with the more marketable and feasible prod­ucts.

Without a strong idea­management system, companies can build a range of innovative ideas that simply gather dust, and never move beyond the idea stage. Using a “company incuba­tor” for those currently “non­viable” ideas will keep them fresh and usable as soon as the environment is condu­cive and the viability for success is much greater.

Assuming your business has an environment open to innovation and is using time tested patterns; a wealth of great ideas will be generated. But without clear metrics being estab­lished to prioritize and sort ideas in advance, a rational means for evalu­ating ideas will be absent. This often will result in companies moving for­ward with seductive ideas that don’t fall into a set of pre­defined criteria.

On the other side of the coin, don’t invest a significant amount of efforts on an in­depth modeling and feeding evaluation engines. Some of the most competitive companies prioritize their innovation “options” by only consider­ing achievability and attractiveness.

To obtain the very best innovative ideas your business should seek new insights externally, not just internally for suggestions, feedback and market opinion. This may include talking with your customers, vendors, brokers and clients, comparing your business to your competitors and leveraging the knowledge gained to create new and different ideas that could generate opportunities for a breakthrough.

“Only 21 percent of innovation survey

respondents had received training on

how to participate in innovation

teams.” The Innovation Network

Training and coaching are essential components to successful innovation. A recent survey indicated that only 21% of respondents had some train­ing on how to participate in innovation teams, and less than 10% had any training as part of the innovation team. A clear process also needs to be set in place, to prevent innovation reviews 6 or 8 weeks after a new innovation kick­off which may result in finding that ‘innovation isn’t working’.

The innovation process must enable people to focus on the right chal­lenges and should ultimately lead them through organized steps to unlock strategic creativity, evaluate results and hold them accountable. This should prevent non­viable prod­ucts and ideas from moving into the implementation and launch process.

1 2 3 Business Culture

and Idea Management

Criteria, Metrics and Fuzzy Front

End Training and Innovation Processes

AUGUST 2010 5

Your corporate strategy should be broad enough to allow for exploration into related areas for innovation, but narrow enough to define your core competencies. Furthermore, business unit managers should be engaged in the innovation process from the start, so that they have the opportunity to buy­in to new concepts before they devote both time and budgets to them. Without early adoption from managers, innovations tend to fail. Going through an exercise of describ­ing your current reality and trajectory as well as agreeing on a long­term vision and near term aspiration will help to define the real challenges you are faced with.

Innovation takes time, energy and money – CEO’s need to be willing to devote resources, new skills and systems to support innovation for success to be likely. Additionally, it is equally important for companies to embrace as much diversity as possi­ble into the innovation process, incor­porating people of all ages, races, genders and thinking styles along with competitors, customers, suppliers and stakeholders. The CEO’s and presi­dents of companies need to be on the forefront of innovation. They should follow the example of companies like Becton Dickinson, where the “Leaders as Teachers” approach is fully inte­grated in the innovation mindset of the organization.

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Strategy and Managerial Adoption

Resources and Diversity

Understanding the basics of innovation strategy provides a good foundation, however, it is equally important for firms engaged in active innovation initiatives to remain flexible and continually adapt their process and approach to maxi­mize chances of success. Innovation requires new ways of thinking and new skills. Developing a just­in­time, active­learning training process ensures that innovation teams develop the desired results effectively and efficiently. You may want to ask yourself what type of innovation you want to pursue – sustaining innovation or disruptive innovation? Sustainable innovation focuses on making improvements to existing products or services, and typically benefits incumbents, whereas disruptive innovation favors new entrants into the market, such as cellular phone companies enhancing phones to incorporate MP3 mu­sic players to take market share from Apple iPods in the portable music mar­ket. Although disruptive innovation is key to new growth, companies should never ignore their core offerings and should continue to pursue sustaining innovation to maintain that growth. They should devote resources to disruptive strategies which will enable them to profit before someone else does and to build a foun­dation of growth for the future. Developing the strategic priorities as the next step after imagination and ideation, the “no brainers” (highly attractive / highly achievable”) have to exist in cozy company with the “crazy ideas” (highly at­tractive / perceived as “low achievability”) and measurements need to be taken to transfer them to become “no brainers”.

Other important factors to incorporate into an innovation framework include:

Learning and rapid adjustment should be incorporated into your emergent strategy.

Remember to be “impatient for profit, patient for growth.” Pursue and obtain information that you can gather quickly which will in­

crease your confidence and support the idea that you are moving in the right direction.

Static strategies are risky! If you learn that your strategy appears less

attractive in the initial phase, don’t be afraid to eradicate a fundamentally flawed strategy. Consider how to shape it in directions that will give an increased chance of success. Bud Paxson called this process “learn when to hold and when to fold.”

Assumptions are key. Testing key assumptions will help you reduce the

venture’s risk by finding the right strategy more efficiently and with more targeted investments in time, money and manpower.

Have defined milestones and check those points along the way to facili­

tate an effective process. Continually revisit your strategy. As the innovation process moves for­

ward, assumptions that may have appeared to be important will become less so, and new assumptions will emerge that need to be tested and validated.

Framework for Innovation

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Given the expense, time and money required to nurture innovation in any business, it is becoming increasingly com­mon to share efforts with external parties, often providing a fresh approach, outlook and generating a multitude of ideas. If you are looking for outsourcing assistance with innovation to jump­start your product or process development and improvements, company repositioning or new marketing messaging, there are some key points to take into consid­eration: Seek partners who can help you fill your innovation funnel – establishing partnerships and promoting activities

such as innovation clinics, workshops and brainstorming sessions. Make sure your partner is in a region with a reliable infrastructure – first move advantage in a remote location

comes with high­infrastructure costs. When working with a partner, you don’t want to be paying for basic infra­structure such as PC’s windows licenses, broadband etc.

Use a local agency or consulting firm to help narrow down the field of choices. Match your partner with your company size. If you are a start­up or a small group within a large company, work

with a relatively small partner of around 200 or fewer people, where you can still garner the attention of their senior management.

Partner Selection

Summary Successful innovation directly drives economic growth, but nurturing a successful innovative business environment is challenging, with most new innovations failing to realize an increased profit or market share. If particular steps are taken within your organization to foster a nurturing and open innovation environment based on time tested patterns of success, the chances of successful innovations beyond product and price are greatly increased. At KaiMethod, we strongly recommend a balance between sustained and disruptive innovation initiatives, to give your firm the best chance of leveraging and nurturing innovations that will work in your market, for your business. We encourage companies to consider partnering with someone unexpected to drive innovation projects, as this can reduce your risk while simultane­ously increasing your chances of success. Good companies measure innovation with sales growth figures. It is important to establish and maintain metrics for your initiatives, to “align the parts with the whole” and to create a simple review process that will be part of the rhythm of your organization. If you plan on growing your business by 10%, it is essential to think of how much growth comes from innovation and how much is coming from existing products or services?

KaiMethod (www.kaimethod.com) is a strategic creativity methodol­ogy that helps large and medium sized companies seize strategic options others ignore, unlock innovation and build strategic thinking skills.

Helmut Albrecht is an Executive Consultant with KaiMethod and a certi­fied SMART Conversations® facilitator and helps his clients to outthink their competition. Helmut Albrecht can be reached directly via email at helmut@kaimethod.com and his LinkedIn profile can be viewed at www.linkedin.com/in/helmutalbrecht.

Andy Martin is a general manager and international entrepreneur experienced in both start­up and established organiza­tions. He has a broad range of expertise that includes strategy development, innovation, and operations lead­ership. Today Andy serves as co­founder and Executive Vice President at Utopia, Inc. – a dynamic and rapidly growing data management company with worldwide operations. Andy is a West Point graduate and also holds an MBA from Northwestern University. For more information about Andy, visit www.Andy­Martin.us

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