July 26, 2016 Innovation That Works

Volume 11 | Issue 3

How to dispel obsolete assumptions and ask new questions.

Management suites across the globe today have begun shouting to the rafters that “innovators win!” Yet for most firms, no road map exists to direct them toward consistently successful innovation, including how to achieve it or how to implement it. Nonetheless, attaining innovation that works again and again is possible. By challenging outdated assumptions and then adopting an “innovation architecture,” you can “chart out” what you need to do around the three most critical dimensions of innovation – the “what,” the “who” and the “how.”
A simple way to organize thinking and actions about innovation is by asking three key questions:
What is the purpose of innovation?
Who should be responsible for innovation?
How do you innovate?

PURPOSE OF INNOVATION: FROM NEW PRODUCTS AND SERVICES TO NEW BUSINESS MODELS
In terms of the first question, studies of innovation conducted by the Doblin Group and IBM Consulting have found that the majority of companies focus their efforts on product and service development. However, the study also found that “business model innovation” nets a disproportionally higher return.

For example, the Boeing Sonic Cruiser, a great technological innovation, lost out to competitors with better business models. Unveiled in 2001, this new aircraft was designed to cut transatlantic flight time from 7 hours to 5½ hours – a substantial improvement. However, to save the hour and a half of flying time, Sonic Cruiser passengers would have had to pay an estimated $10,000, compared to $5,000 for a first class ticket on other flights. And total travel time from downtown London to downtown New York would only have been reduced from 12 hours to 10½ hours.

A surprise competitor then entered the market in the form of semi-private timeshare jets. These focused on reducing on-the-ground time by flying from London’s Northolt to Teterboro, New Jersey, which avoided the many delays associated with commercial flights using big airports. Total travel time reduced to nine hours at a per passenger cost of just $7,500. Boeing ended up shelving its technological marvel while the time-shared jets – the business model innovators – took off.

INNOVATION PLAYERS: FROM FEW TO EVERYONE
Besides R&D, who else should be involved in innovation? The answer is two-fold: most functions, levels, business units, and geographies within a company have an important role to play as well as outsiders such as suppliers to the company should be involved as well.

Cemex, the global, Mexico-based cement and building-solutions company, takes this broad involvement concept to heart. More than 3,500 employees have submitted in excess of 6,300 proposals to its Web enabled data bank. In addition, the company holds nine innovation days each year, and for each event, the hosting VP invites everyone in his/her unit to participate. During such an event, hundreds of ideas are generated and the successful innovators are honored with company-wide recognition. Its innovation program has transformed Cemex from a commodity material supplier to a value-added solution provider, generating growth rates, gross margins and returns on equity that are unparalleled in the cement business worldwide.

HOW TO INNOVATE: FROM SERENDIPITY TO A SYSTEMATIC PROCESS
A systematic innovation process sounds like an oxymoron. After all, if it’s systematic, how can it possibly be innovative? Yet this is another obsolete belief. A recent survey of ours has found that firms with an established innovation process in place “out innovate” others in their industry. One participant wrote: “An innovation process is critical to bringing structure to a fundamentally unstructured activity…Without a process to bring order to the chaos this money is wasted.”

WHERE TO START?
That innovation is an unavoidable imperative is no longer in doubt. That innovation can be achieved by any company that sets its mind to it has been proven. That innovation can be continuously successfully by firms that implement a systematic innovation process has been demonstrated as well. The key issue is simply to figure out how to get such an effective innovation effort started.

Using innovation architecture to organize your innovation efforts is your first step. Determining who should be involved is a close second step, erring on the side of broad engagement since imagination and creativity are always randomly distributed. Train the team you have assembled in the what (business model) and the how (systematic innovation process), freeing up enough of their time so they can be effective, and warning them of the pitfalls they are likely to encounter.

Next, send members of your team off on their discovery mission. Ask them to address questions that typical planning or innovation processes don’t address: What outdated assumptions about our business might we consider overturning? What unarticulated needs are currently held by our customers, and as important, our non-customers? What discontinuous changes in the environment may be about to occur that we might capitalize upon? What true core competencies does our company possess that may be leverage-able in different ways?

And once your team comes back to you with answers to these questions, next have them generate ideas that will capitalize on these insights. Finally, get and stay involved in the process as a coach, resource and sounding board – but not as a traditional reviewer or a doubting Thomas. Based on our firm’s experience with our clients, by following these procedures, you will be pleasantly surprised by their ultimate results.

Pierre Loewe (ploewe@strategos.com) and George Chen (gchen@strategos.com) are Directors at Strategos, a Chicago-based global strategic innovation firm. Loewe is a founding member of Strategos and focuses on identifying new opportunities and developing breakthrough strategies for clients. Chen is passionate about nurturing emerging businesses within emerged enterprises.

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