Let’s talk innovation. Not just any innovation, but the kind corporate America needs to be good at to be successful. Last week’s introduction of the Apple iPad has once again brought this topic to the forefront. Whether you think the iPad is a true innovation or just an iPod Touch on steroids, there’s little doubt that Apple is an innovation leader. Fast Company put them Number 3 on their 2010 list of most innovative companies (although they also put Facebook Number 1, which is a bit of a stretch).
In my 30-year career as an executive in the high-tech industry, I’ve seen a lot of innovation successes as well as failures. I’ve also seen how innovation, intelligently applied, can turn a business around from failure to success. As one example, some years ago I took over as R&D manager for a small product line in Hewlett-Packard Company. The main reason I got the job was that the HP managers then responsible for it wanted to shut it down. They saw it as a weak business in a stagnant market, running a distant second to the market leader with no hope of improvement.
A few of us saw it differently. We recognized potential in areas the current management didn’t see. They were happy to give us something they saw as nothing more than an albatross around their necks. Within two years, we introduced a line of products that vaulted HP to the leadership position in a rapidly growing new market. Over the next several years, this product line generated over half a billion dollars of new revenue for the company. It has continued to be one of the company’s most profitable product lines ever since. Not bad for a business nobody wanted.
In a coming series of blog entries, I’ll share some insight on innovation in the corporate world. I’ll look at what it takes to be innovative, see why some companies are good at it and others bad, and explore some popular misconceptions about it. I’ll also share a little more insight into the HP success story. I’ll start, though, by defining what innovation is.
Innovation Defined
Every manager in the business world has heard the dire warnings. Innovate or die. Obsolete yourself before your competition does it for you. Only the paranoid survive. Fearful of being left behind, every company strives to out-innovate its competitors, to the extent you’d think society would be awash in unbridled growth.
And yet, most of that innovation fails to fulfill its promise. For every Apple iPhone or Toyota Prius, a thousand other innovations end up on the scrap heap of failed ideas. How can this be? Academic texts on growth and innovation have been around for decades, and the theories they promote are sound. Consultants make good livings showing companies how to put these theories into practice. Why isn’t every company a fountainhead of innovation?
It’s not that managers haven’t read the books or listened to the consultants. The problem is that theories that seem so simple in print are much less so in real life. If a manager could only devote all her attention to nurturing innovation, life would be so much easier. But stark reality intrudes. Shareholders demand consistent quarterly performance. Executives have little patience for a manager who misses his numbers to fund an innovative new idea. The finance team seems more interested in reducing R&D expenses and increasing gross margins than in helping build a business case for that new idea. Customers complain about defects in current products that are making their lives miserable and must be fixed. The real-life manager must deal with issues like these while simultaneously trying to position the product line for long-term growth.
Today, the importance of innovation to a company’s success is broadly accepted. But what exactly does it mean to be innovative? A review of the literature provides many definitions, generally along the lines of “inventing something new.” I find that too vague. Innovation is more than just invention. Here is a better definition:
Innovation is the ability to see opportunity in places others don’t and then turn that vision into reality.
Notice the two parts to this definition: the ability to see opportunity—the innovative idea—and the ability to turn that idea into reality. You need to be good at both. In the business world, good ideas aren’t worth anything if they aren’t successfully commercialized.
The tendency in many companies is to think about these two parts separately. For example, the business’s senior leadership team might get together for regular “innovation” discussions. From these come such things as market segmentation analyses and product portfolio plans. But how often do these discussions include an assessment of the organization’s ability to deliver? If every new product introduced in the last three years took 30 percent longer than originally planned, has the leadership team added an objective for improving execution?
It should. What good is it to come up with innovative ideas if you can’t convert them into a sustainable revenue stream? Conversely, what good is it to introduce new products on time and on budget if you haven’t chosen the right products to introduce?
The Five Tenets of Innovation
Before going any further, let’s examine what I consider to be the five most important tenets of innovation. They apply across the entire organization, but are especially important for R&D:
1. Any company that wants to grow needs to be good at innovation
2. There are various types of innovation, and the best companies excel at all of them
3. Innovation requires commitment from all levels of the organization, starting at the top
4. The R&D department must be an innovation engine.
5. Innovation is a team game; R&D can’t do it all on their own
Many people think innovation is R&D’s responsibility. After all, it’s the exciting new product or service introduced by R&D that will drive the company’s success. But that’s too narrow of a view. While R&D is central to an innovative culture, they can’t do it all on their own. Keep in mind the fifth tenet above—innovation must be a team game. In coming blog entries, I’ll take a more detailed look at each of these tenets.
Next: The First Tenet of Innovation
Great post - I agree that the key is the second part of the definition - the actual "turning vision into reality" but this is where MARKETING is so important throughout the Innovation process. From doing the market research about customers wants/needs through to developing the market to achieve ROI sales.
ReplyDeleteIt is no good develoing anything that the market doesn't want and equally useless if a brilliant product is developed and insufficient resources are not put into the marketing /sales activities to maximise the innovation development effort.
If the idea is THAT good, every ounce of everyone's effort across the whole corporation should be put into making sure that it does exceed its potential over its first year. The reaility is that most "innovative" ideas are just considered another product once developed and sold amongst every other product in the catalogue - this is why so many innovations fail - a combimation of poor initial market reseach and lack of intensive sales & marketing effort after launch.
keep up the good posts
Michael Huxley
Hi Michael,
ReplyDeleteGreat comments, and I will cover exactly this topic in the discussion of my fifth tenet, that R&D can't do it all alone, innovation needs to be a team game. One of the most frustrating things a company's senior management can do is kill the marketing budget when times get tough, on the misguided belief that if they cut everywhere except R&D, they'll get a slew of new products out when times get better. As you point out, without a marketing team to do market research, there's a good chance they'll be inventing things the market doesn't want. I'll also talk about marketing in some of the entries I'll be posting before that one. Let me know what you think.