By Jay Rao
For most firms, innovation is more a slogan or aspiration than a managed practice. Below, Jay Rao shows that for the best companies, innovation is a set of practices and attitudes built into daily work and long-term thinking, and argues that organisations should start treating innovation as a real discipline.
Have you noticed how the word “innovation” has crept into CEO speeches, consultant presentations, marketing material and the media? There’s no escaping the overuse and misuse of the “i-word” these days. Companies mentioned it 33,528 times in their 2012 official reports, a 64% increase from 2006. A study of 260 Global executives revealed that 40% of them had a Chief Innovation Officer; and for most, such titles were mainly “for appearances.” These same executives conceded that they didn’t have a clear innovation strategy to support the role.1
Regrettably, as it stands today, for most firms innovation is more a slogan or aspiration than a managed practice. I find myself in front of 1,000-plus executives and managers each year, and I ask them the same question: “How many of you are tired of hearing the word innovation?” Many hands go up. When asked why, the responses are predictable:[ms-protect-content id=”9932″]
“It’s all talk and no action.”
“We’re told to be innovative, but are never given the time or resources.”
“Our innovative projects get shelved even if one quarterly target is missed.”
“Our leaders want us to be innovative when they aren’t.”
Abuse of the i-word isn’t just annoying, it’s wasting money. Firms have invested in ideation software, new product development systems and internal venture funds. And, of course, lots of money is spent on consultants who, they hope, will magically deliver organic growth. For most, that spending hasn’t paid off. A BCG survey found that 45% of executives were dissatisfied with their financial return on innovation spending. Dissatisfaction among employees was even higher at nearly 64%.2 A McKinsey innovation report3, based on a global survey of nearly 1400 executives concluded that:
• Executives cited innovation as an important driver of growth but few explicitly led and managed it.
• CEOs and executives were frustrated with efforts to jumpstart innovation initiatives.
• There was overall dissatisfaction with the outcomes of their initiatives.
• Mimicking best practices was often ineffective.
Nearly a third of respondents managed innovation on an ad hoc basis.
So, is the current talk about innovation real or nothing more than corporate blather? Certainly, with so many people thinking and talking about innovation, we must be making some progress. But imagine for a moment how much more progress we could be making if innovation was treated less as a buzzword, an aspiration, or a magic organic growth formula and more as a true discipline!
It’s time to end the i-word nonsense and start moving in that direction.
What Other Disciplines Can Teach Us
The business world has many disciplines and their evolutions provide insights into the development of innovation as a body of knowledge and a field of practice. Consider marketing. Like other established disciplines, marketing has conceptual frameworks (e.g., the “4Ps”) and a unique vocabulary—the Lingua Franca. It has developed practical methods (e.g., Segmentation, Targeting, Positioning) and tools (e.g., conjoint analysis) that practitioners master through formal study. Over time, academic departments have formed to develop a body of marketing knowledge and to pass it on to others. Journals, professional associations, and conferences dedicated to marketing add new knowledge and evolve the discipline.
We have witnessed a similar evolution with the quality movement which, like innovation today, was initially more aspirational than effective. The early concepts of quality were developed in the United States during the 1930s and then spread to post-war Japan. Seeing the potential of quality control tools to save scarce resources and improve the poor image of their products abroad, Japanese industrialists embraced quality and broadened its scope through concepts such as kaizen and muda. They turned quality into a teachable discipline and management philosophy with strategic implications.
By the early 1980s, that new discipline was being adopted widely. In the US, the methods of quality evolved into TQM, encompassing the entire enterprise and its supply chain. Six Sigma, a later variant of the quality discipline, had a few more distinctive features than its predecessors. Irrespective of what it was called—Lean, TQM, Six Sigma—these practices tended to share the following traits:
• Integration with firm strategy
• Championship by top leaders
• Support from a cadre of experts—master black-belts—in the concepts, methods and tools of quality
• Training of black and green belts—making all employees knowledgeable of quality’s tools and their strategic implications.
Corporations that took quality seriously made it part of their culture—embedding the new “discipline” into their thinking, planning, training, and behaving. FedEx was one of those companies. It trained its people in the discipline of quality and integrated that discipline into the fabric of the organisation. Today, the tools and methods of its particular approach (which it calls “Quality Driven Management”) are used across the company’s many business units. As described by Robert Quinn, Corporate VP of Operations and Service Support:
Quality Driven Management is wired into the culture of FedEx. It is in the expectations we have for our people. It is the processes that they follow for continuous improvement. . . . It is the language we use and the rewards and recognition we give to our team members.4
Not every company that bought into the discipline of quality enjoyed FedEx’s long-term success. Many, in fact, lost interest or were derailed by bumps in the road. Nevertheless, enough of them succeeded to give the movement staying power. Academic research and courses followed, as did journals, conferences, consulting practices, and professional associations. Today, quality is no longer an empty buzzword or organisational aspiration, but a solid discipline that produces measurable benefits. To become a true discipline, innovation must go through a similar evolution.
“Despite the availability of principles, methods and tools, several obstacles impede progress in treating innovation as a discipline; these include widespread misconceptions, wrong or narrow definitions, unrealistic expectations, and a need for instant gratification.”
We can learn several lessons from the evolutions of business disciplines:
• Mastery is the result of choice and commitment. Not every firm wants to be great at marketing like Coca Cola. Not every firm aspires to operational excellence like Aldi. Mastery of any discipline requires a choice and commitment to the hard work of learning and practicing. Commitment comes from desire to excel in a specific discipline.
• Mastery requires years of effort. For a discipline to be mastered, the leadership team must make it a high priority and commit resources to it over many years. Toyota has worked for decades to embed quality into its corporate culture and value system.
• Mastery requires a cadre of experts to lead the way. Motorola and other Six Sigma companies created internal cadres of experts to assist and guide the quality initiatives of others.
• Mastery requires a broad-based understanding of principles and methods. All employees should have some basic level of training and involvement with innovation.
Innovation’s Evolution as a Discipline
As a corporate discipline, innovation is relatively new and is perhaps midway along its evolutionary path—standing roughly where the quality movement was twenty years ago. In the worst cases, it remains an empty buzzword.
Disciplined corporate innovative efforts can be traced back to Thomas Edison’s first “invention factory,” Bell Laboratory and the R&D centers of Kodak, DuPont, IBM, Siemens and other offsprings like Xerox PARC. By the 1980s several tools of the innovator’s craft were being adopted by new product developers. However, it wasn’t until the 1990s, that pioneering academics—Peter Drucker,5 James Utterback6 and Clayton Christensen7 —began publishing books that explained innovation as a structured process, and told executives how to harness it in the service of organic growth and strategy. At the same time, the emergence of Internet-based firms such as eBay, Google, and Amazon made it clear that innovation is not limited to physical products, but extends to services and business models. The resurgence of firms like Apple, IBM and P&G re-confirmed the power of innovation. So today, academics are studying and writing about it, and today’s employees have many useful principles, methods and tools to work with (see sidebar). But much remains to be done within companies before the benefits of innovation-as-discipline will be felt.
Despite the availability of principles, methods and tools, several obstacles impede progress in treating innovation as a discipline; these include widespread misconceptions, wrong or narrow definitions, unrealistic expectations, and a need for instant gratification. The biggest of these is a failure to recognise and support the “soft” side of innovation. Executives are investing substantial time, money and energy on resources and processes—all of which are necessary. Most, unfortunately, ignore the values, behaviors and workplace climate—essential aspects of culture—that make those investments pay off. Several studies support the conclusion that enterprise culture is as important as R&D investments in generating innovation.8
Successful innovation is one part principles, methods and tools, and another part human creativity and insight. Leaders must bring these two very different parts together. Consider how two firms have managed to do that through their attention to discipline and culture.
For decades Whirlpool, the leading U.S. appliance maker, was fixated on quality and cost. In 1999 the company embarked on a mission to be recognised as Number 1 in innovation. It began by asking 75 employees to think creatively about new possibilities. One of the group’s ideas turned into a hit product, but most ideas fizzled.
Whirlpool re-thought its approach. It had to help people get beyond the idea stage and into the realm of practical commercial opportunity. To do that, it enrolled every salaried employee in a business innovation course; then trained a smaller group of people as “I-mentors.” These mentors were analogous to Six Sigma master black belts; all had regular jobs, but facilitated innovation projects and helped fellow employees to develop and test their ideas. Nine years on, 1,100 of Whirlpool’s 61,000 employers were I-mentors. An intranet portal offered a common forum for learning the principles of innovation, for keeping abreast of recent research, and for tracking the progress of ideas under development. Employee teams from all levels were formed to vet new ideas.9
The innovation initiative paid off. Two years on, Whirlpool had 100 credible new business ideas, 40 concepts in experimentation and 25 new products and business concepts in prototype. By year three, it had hundreds of ideas in the pipeline, 60 in prototype and 190 being scaled for the market. In year four, new products generated by the innovation program contributed nearly $2.5 billion in revenues. In year five, new products accounted for $4 billion of Whirlpool’s $19 billion revenues.10
W.L. Gore: Culture11
In 2012, W.L. Gore, a $3 billion company, was ranked for the fifteenth consecutive year among the “100 Best Companies to Work For” by Fortune magazine. Also, for several consecutive years, it was named one of the best workplaces in the UK, Germany, France, Sweden, Spain and Italy. The voluntary turnover rate at Gore was around 5%—one-third the average rate in its industry and one-fifth that for private firms of similar size. While best known for its Goretex® fabrics, Glide floss and Elixir guitar strings, Gore also gained notoriety in medical implants, cables, and filters for electronic and pharma applications.
Gore enjoyed a well-deserved reputation as a company with a very innovative culture. It did not specifically train people for innovation but infected them with its obsession for creating breakthrough products based on extended-polytetrafluoroethylene (ePTFE) technology. Gore eschewed job titles, bosses and bureaucracy, and all associates could spend up to 10% of their work hours “dabbling” with their own ideas. They could also “gift” their expertise to teams that were toying with innovative projects. At any given time, Gore had hundreds of these projects underway.
There was discipline, however, beneath this seeming chaos. First, the company aimed for ePTFE-related innovations that would give them highly differentiated market positions. Second, projects died if employees didn’t sign up for them. Third, the dabbling-to-profitability journey had to pass three reality checks: Will people buy it? Is it a money maker? Finally, will it provide a sustained advantage—perhaps through a patent?
Gore was patient in getting its projects right and moving them to market. There were no cut-throat timelines or calendar marks. However, the company also knew when to pull the plug. All had skin in the game through employee share-holding.
Discipline + Innovative Culture: An Unbeatable Combination
Moving beyond buzzwords and aspirations to a disciplined approach to innovation can set any organisation apart and give it competitive advantage. That advantage is multiplied when discipline is combined with an innovative culture. An innovative culture assures that promising ideas are plentiful, and that the opportunities behind the best ideas are recognised. Discipline assures that those opportunities will be addressed efficiently, effectively, and with an intelligent appreciation of risk. Discipline and an innovative culture is an unbeatable combination!
Many companies are learning the discipline of innovation12, following a path similar to that of their predecessors in the quality movement. If the history of that movement is any guide, we should see widespread mastery and adoption of innovation’s principles, methods, and tools by the end of this decade.
The greater challenge will be building innovative cultures. Culture is hard to grasp and difficult to change. There is, however, cause for optimism. Toyota, FedEx and GE mastered the discipline of quality and built it into their cultures, making them formidable competitors.
On the innovation side, we observe similar encouraging unions of discipline and culture at 3M, IDEO, and P&G.
And though even the best of these may occasionally stumble under one or another regime of leadership, culture tends to be persistent and carry them across periods of inattention. For them, “innovation” is not an empty slogan or a term sprinkled liberally through annual reports. Rather, it is a set of practices and attitudes built into daily work and long-term thinking.
Tired of the meaningless i-word? Then start treating innovation as a real discipline.
About the Author
Dr. Jay Rao teaches at Babson, in its Executive Education programs, and consults widely around the world. His research has appeared in The Sloan Management Review, The European Financial Review, IESE Insight, and other publications.
1. Leslie Kwoh, “You Call That Innovation,” Wall Street Journal, 23 May 2012
2. Innovation 2010, Boston Consulting Group Report, April 2010
3. Leadership and Innovation, The McKinsey Quarterly, 2008, No. 1
4.“Quality Belongs to Everyone,” http://www.youtube.com/watch?v=6q6V5J1qDs8 <accessed 7 July 2012>.
5. Peter Drucker, Innovation and Entrepreneurship, HarperBusiness, 1985
6. James Utterback, Mastering the Dynamics of Innovation, Harvard Business School Press, 1996
7. Clayton Christensen et. al., Seeing What’s Next, Harvard Business School Press, 2004
8. “The Global Innovation 1000, Why Culture is Key,” Strategy + Business, Booz & Co., issue 65, winter 2011.
9. Terry, Waghorn, “Making Your Company An Innovation Machine,” Forbes.com, 8 January 2009.
10. Innovation 101: Whirlpool’s Spin on Innovation, IndustryWeek.com, 16 July 2008.
11. Jay Rao, “W.L. Gore – Culture of Innovation,” Babson Case Study BAB698, 2012.
12. True innovators already outperformed their peers by nearly 12.4% over a three year period and by a modest 2% over ten years. Source: Innovation 2010, Boston Consulting Group Report, April 2010.