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Prism / 2 / 2006

Could you imagine being in the business of selling holes –and thereby growing sales to € 2.5 billion and generating arespectable 16 percent return on equity? Well, that’s exact-ly what Hilti is doing. Based in the Principality ofLiechtenstein, Hilti is the world’s leading producer of powertools and technical equipment for the constructionindustry. Having established a reputation for technologyleadership and product excellence, Hilti’s managementturned its attention to services and business model innova-tion. It thus accomplished a change of paradigm by selling“holes” instead of drilling machines. The foundation of thechangeover is a fleet management concept, in which Hiltitakes full responsibility for providing its customers with theappropriate equipment for maintenance, repair, replace-ment and upgrade at all times. By offering a complete solu-tion package instead of only selling individual products andservices, Hilti enables its customers to focus on their coreactivities – and thus secures their loyalty.

Hilti’s changeover is one that inspires many companiessearching for breakthrough innovations. Enthused byAustrian economist Joseph Schumpeter’s famous phrase“creative destruction”, executives are eager to stimulatecreativity and re-invent their business. Traditionally theyhave relied on two pillars to cultivate innovation, which wecall the “centre of excellence” and “grassroots” pillars:

• The “centre of excellence” pillar embodies the ideathat innovation is carried forward by specialist func-tions. From the top-down, the company mandates spe-cialist institutionalised bodies – such as the R&D andMarketing departments, an incubator, a think tank, andthe like – to be creative and create innovations.

• The “grassroots” pillar relies on suggestions for contin-uous improvements from employees throughout theorganisation. The quintessential embodiment of thisbottom-up approach is the “idea box”. While most com-panies utilise this approach, effects are usually modest,leading to only incremental and partial improvements.

Creative Power - Unleashing thecreativity of your employees withoutgetting crippled by complexityRalf Baron, Reine Wasner and Michael Zintel

Companies are always

trying to get the best

ideas out of their

employees, but traditional

approaches like “the idea

box” usually don't bring

the desired results. In this

article the authors show

how the best way to real-

ly tap into this richest of

all creative sources is

through innovation award

programmes.They set

out the characteristics of

successful programmes

and the business case

behind them.

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Prism / 2 / 2006

Creative Power

Increasingly executives are attempting to combine thebest of both worlds: to go for breakthrough innovationsand to involve the whole company in this exercise. Theyrealise that, as a result of their reliance on focused spe-cialists, they ignore what may possibly be the richestfountain of innovation: the collective creativity of theentire organisation. In order to leverage the full creativepower of their organisation, they use collective mobilisa-tion instruments that involve every single employee withinthe organisation. While there are various such instru-ments, innovation awards are among the potentially mostattractive.

Unfortunately, such instruments can also create a lot of“collateral damage” in the form of added complexity,especially in large organisations. Involving all employeesactively and meaningfully in an innovation award pro-gramme is a fiendishly complex undertaking. But compa-nies like tourism group TUI, insurance company Allianz,chemical group Solvay and fast-moving consumer goodscompany Henkel show how to solve this dilemma by tap-ping into the collective creativity of the organisation whileminimising complexity. Although they obviously maintainthe “centres of excellence” and “grassroots” pillars, theyhave made innovation award programmes their dominantstrategy for promoting and driving innovation.

In this article, we will describe the characteristics of suc-cessful innovation award programmes, as well as the busi-ness case in favour of them. We will also show how tocope effectively with the concomitant complexity. And wewill illustrate the insights with a case study from TUI AG,the European market leader in tourism.

The characteristics of successful innovation award programmes

Innovation award programmes are initiatives with a clearroadmap targeted at all employees and tangible rewardsfor winners. Successful programmes share a number ofkey characteristics: they are set up as competitions; theyinvolve top management; they are organised as cam-paigns; they are focused on teams, and they care for sus-tainability. Let’s look at each of these in more detail.

Executives increasinglyrealise that, as a result oftheir reliance on focusedspecialists, they ignorewhat may possibly be the richest fountain ofinnovation: the collectivecreativity of the entireorganisation.

23

• Competition: Internal competition is the engine ofaward programmes. Solvay calls its innovation pro-gramme the “Innovation Trophy” and TUI uses anOlympics theme. The use of metaphors from sports,hunting and gaming aims at pushing the issue of inno-vation out of the “business-as-usual corner” into therealm of out-of-the-box thinking. The competitive spiritemotionalises innovation management and triggerspeople into participating. As in any other serious com-petition, innovation awards are based on transparentand easily understood rules. The competition is open toeveryone, and the best applications are awarded tangi-ble prizes at the end. In other words, the game formatis beneficial for at least two reasons: it adds an emo-tional component by challenging employees to bringthemselves into the process, and it provides a simpleand easily comprehensible structure and framework. Italso builds expectations of fairness and transparency.

• Top-management involvement: Large organisationsare continually fighting against excessive hierarchy andcomplexity. Business strategies usually trickle downalong a cascade of checks and responsibilities. It ishard for upper management to have direct influence onand remain in touch with the shop floor. An innovationaward strategy brings in a shortcut. All corporate inno-vation award programmes we have worked with havethe CEO or another senior executive in the drivingseat, functioning as sponsor. From the viewpoint of thecorporate citizen, the innovation award programmeopens up a direct reporting line to the top layer of theorganisation. Shaking hands with the CEO at the awardceremony is the institutionalisation of an objective thatlarge corporations are eager to achieve: providing directaccess to top management.

• Campaign organisation and momentum: Even inno-vation award programmes that have been running formany years do not operate within the confinements ofline structures. There are no innovation award depart-ments and rigid reporting lines. Innovation awards pro-grammes are usually run in campaign-like set-ups,much like political elections. Campaigning goes togeth-er with intensive advertising, widespread mobilisation

Successful programmesshare a number of keycharacteristics: they are setup as competitions; theyinvolve top management;they are organised as campaigns; they arefocused on teams, andthey care for sustainability.

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Prism / 2 / 2006

Creative Power

(e.g. through road shows) and broadcasting of generalinformation (e.g. through an internet portal). All com-munication channels within the organisation are usedand campaign helpers come from all parts of theorganisation. In particular, lower levels of the organisa-tion feel attracted, which secures the operational fit ofthe campaign with current operations and issues.

• Team orientation: By definition, award programmesculminate in the giving out of a prize. The recipient canbe the individual who came up with the initial idea orthe team that came up with a joint idea or furtherdeveloped an existing one. Regardless of the numberof people being rewarded, the prize itself is always abig discussion point, and therefore has to be wellthought-through. There are two schools of thought onthis. One school favours tangible rewards in the formof financial or other compensation, while the otherbelieves in intangible rewards such as recognition orthe opportunity to contribute and see one’s idea imple-mented.

• Sustainability: An innovation award programme willbear fruit only if it is sustained over a long period. Firstof all, the introduction of a corporate-wide innovationaward programme requires significant investment.Only a long-term approach will provide a return on thisinvestment. Secondly, a long-term approach offers par-ticipants a second chance should they fail to make itinto the finals of the race. In order to secure the pro-gramme’s sustainability, then, several challenges needto be addressed. First, one has to deal with the disap-pointment that results from failing to pass a selectiongate. The further the idea gets, the greater the disap-pointment. All participating employees should get apersonal thank you, detailed feedback and a small giftas gratification. Additionally and even more importantly,they should be given the opportunity to realise andimplement their idea at a local or decentralised level,even if the idea is out of the corporate award race. Asecond challenge is to sustain momentum year afteryear, both in terms of motivation and idea generation.Generally, the volume of ideas is enormous in the firstyear because the launch of the programme unblocks

25

an “idea traffic jam” by providing people with a forumto bring forward ideas that they may have already hadin mind for a long time. But organisational fatigue canset in after a few years. Even without fatigue there is alimit to the number of ideas that can be generated in agiven domain. In order to maintain the programme’ssuccess, it is advisable to regularly change the awardcategories or process.

The above five characteristics describe the general princi-ples of an innovation award programme. The blueprint fora particular programme will depend on the specific situa-tion and ambitions of the company initiating it, as shownin Exhibit 1. What kind of innovation is requested: should itbe new to the company or new to the world? What is theexpected output: business model innovation or a newservice approach? What level of idea maturity is required:is an idea sufficient, or is a pilot or prototype necessary?What performance degree is envisaged: an incremental ora radical innovation? Is financial impact the only objectiveor are cultural and change management aspects alsoimportant? The design of the innovation award process –from idea generation, concept development and businessplanning to winner selection and implementation – willhave to take into account the answers to these questions.

The blueprint for a particu-lar program will depend onthe specific situation andambitions of the companyinitiating it.

Exhibit 1 Factors affecting an innovation award programme

Newness OutputLevel ofmaturity

Performancedegree

Impact

New to thecompany

Service/product/productfeatures

Idea

Breakthrough

New to theindustry

ProcessConcept

New to theworld

Businessmodel

Incremental

Prototype/pilot

Commercialisedproduct/service

Financial

Customer

Capabilities

Culture/image

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Prism / 2 / 2006

Creative Power

The business case for an innovation award programme

An innovation award programme involving the entireorganisation is resource-intensive. Campaigning for inno-vation requires time and financial and managementresources. Nevertheless, we believe there is a businesscase for innovation award programmes. While most fac-tors going into the business case are soft, there is com-pelling evidence that such programmes pay off. Let’s lookat the five benefits:

• Integrating the organisation: How can “supertanker” corporations be made more dynamic? By intro-ducing a new strategy? By changing the corporatestructure? By announcing a new phase in competition?All of these initiatives are part of corporate life. Theirmobilising effect, however, is usually moderate. Aninnovation award, on the contrary, is a tool well suitedto mobilising people. Such a campaign addresses eachindividual and challenges him or her to make a contri-bution in two ways. First, it combines personal advan-tages with positive goals for the organisation: the con-tributor of a winning idea profits personally from his orher initiative, and the company benefits from the inno-vation. Second, an innovation award campaign refocus-es attention away from internal quarrels or inertiatowards the market and competitors. Only ideas thatare better than competitors’ offers can win.

• Integrating in the organisation: An important bottle-neck for innovation in today’s large corporations is thelack of lateral communications. Different parts of theorganisation do not share what they know with eachother. Companies that have been growing for yearsthrough acquisitions lack an open communication cul-ture. The winning idea in market A is not communicat-ed to market B – or, even worse, is actively withheldfrom it. An innovation award programme acts as a“Trojan Horse” that is able to open up gates and thusto provide new ways to compete.

• Overcoming middle management inertia: Many cor-porations have cultivated a defensive management atti-

We believe there is a business case for innovation award programmes. While most factors going into the business case are soft,there is compelling evidence that such programmes pay off.

27

tude that focuses on cost-cutting, internal positioningand strong discipline. Creative ideas that are generatedat the operational level do not make it further than themiddle management level. Innovation award pro-grammes overcome this barrier by creating a linkbetween grassroots employees and the top manage-ment level.

• Demonstrating activity to outside stakeholders:

Analysts, investors, supervisory boards and otherstakeholders constantly call for visible actions thatimprove the corporation’s competitive position.Innovation awards demonstrate a high level of action.They produce visible results even in early phases – e.g.in the idea generation phase – that can be shown tothe outside world.

• Generating income from new products, services

and processes: Innovation award programmes are notlaunched merely or primarily as rituals intended to cre-ate a feel-good atmosphere inside and outside the cor-poration. While it may not be made very explicit, at theend of the day what counts are measurable bottom-line results from new and better innovations. A welldesigned innovation award programme will contributeto that.

In short, the case for an innovation award programmebuilds on a mixture of soft and hard factors. Such pro-grammes are highly symbolic initiatives. They mobilise theorganisation, they demonstrate activity to internal andexternal audiences and last but not least they contributeto tangible financial results.

Coping with the complexity of innovation award programmes

As we have seen above, innovation award programmesare “simplifiers”. They provide shortcuts between top man-agement and the working level. And, as they are run ascampaigns, they do not require institutionalised organisa-tional structures. However, these shortcuts can also addconsiderable complexity to corporate life. An innovationaward campaign can mobilise hundreds or even thou-

Innovation award programmes are highlysymbolic initiatives. Theymobilise the organisation,they demonstrate activityto internal and external audiences and last but notleast they contribute totangible financial results.

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Creative Power

sands of ideas in the idea generation phase. All ideas haveto be assessed, evaluated and developed into concepts.For a selected number of concepts, business plans willhave to be developed. Decisions have to be made toselect and reward the most promising business plans. Allof these activities are door-openers for increased complex-ity. Let’s have a look at four facets of corporate life thatcarry the seeds of complexity:

• Strategic planning process: Large corporations haveformalised strategy and budgeting processes.Eruptions of creativity that call for management atten-tion, time and financial resources as well as for execu-tive power for implementation carry the highest poten-tial to induce conflict, discussions and problems. Bydefinition, today’s new idea is not included in and maycompete head-on with yesterday’s strategy. Line man-agers may respond to new ideas defensively and tendto see the risk side first. They may try to slow down oreven bring the process to a stop while working-levelteams and individuals will try to push forward.

• Workload management and priority setting: Aninnovation award programme creates additional workfor organisations that are usually already overloadedwith routine work. On top of their daily work, peoplehave to sit down to discuss new ideas and their imple-mentation. Typically employees will start to discusscapacity shortages and priorities with their supervisors,at the latest by the time business cases have to bedeveloped, as this requires specific know-how and sig-nificant effort. The innovation engine can quickly over-heat if hundreds of idea generators ask their supervi-sors for assistance. Complexity also increases whenideas have to be returned or rejected due to missedquality requirements. If not managed well, an awardprogramme can easily trigger a communication andconflict cycle.

• Internal communication: An innovation award pro-gramme calls for good and broad communication, aspeople have to be informed about the rules of thegame, deadlines, expectations in terms of contents,etc. Receiving thousands of ideas submitted in the

29

hope of winning an award puts enormous stress onthe communication system. Every idea has to receiveformal feedback and recognition. Those teams and indi-viduals whose ideas do not make it to the finals haveto be treated with particular empathy and respect.Likewise, one has to deal with idea owners who areunable to take part in concept development and toensure fair treatment of different concepts. The innova-tion award must not produce frustration. It should gen-erate a positive spirit and a shared emotional platformamong employees.

• Project management: An innovation award processwill produce hundreds of questions that have to beanswered on a daily basis. What are the quality require-ments for submitting an idea? How can you make busi-ness concepts from different business units compara-ble? What is the right format for a proposal? Whichdecision criteria have to be applied to differentiate?Who should communicate what? How is team-buildingorganised across organisational boundaries? Who ownsa cross-business unit idea? Answering these questionspromptly and consistently requires careful campaignmanagement.

If not managed well, each of these four facets carries therisk of burying the expected outcome of the award pro-gramme – innovative products and services – under a bulkof additional work, communication and conflict. Each onerequires careful thought and a deliberate strategy to avoidunmanageable levels of internal complexity and to focusthe programme on its real targets: innovation, mobilisationand business impact.

A case example: Innovation management at TUI

While TUI is the European market leader in the tourismsector, it has been more of a fast follower than an indus-try leader in terms of new products and innovation.Traditionally TUI’s innovation approach consisted of twoelements: the product development department and anemployee suggestion scheme. Increasing competition, theemergence of new niche segments and the advent of

Four facets of corporatelife that carry the seeds of complexity: Strategicplanning process, workloadmanagement and prioritysetting, internal communication, projectmanagement.

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Creative Power

online customer buying patterns forced the tourism giantto rethink its approach. It made the decision to initiate agroup-wide innovation award programme, running over anentire year. Using the slogan “let your idea win”, all divi-sions and business areas, covering some 50,000 employ-ees, were to be involved. According to Peter Rothwell,TUI’s Chief Operating Officer, the reason for this newapproach was to “leverage the know-how of the thou-sands of employees ‘at the front‘ and to increase collabo-ration by overcoming geographic and cultural barriers.”

Innovations are pursued in four categories: new productsand services, new marketing and sales approaches, newbusiness opportunities, and process improvements. Theprocess is designed as a milestone-based funnel, startingwith idea generation. The ideas are screened, evaluatedand partially screened out. The remaining ideas are furtherdeveloped into qualitative concepts and quantitative busi-ness plans (see Exhibit 2).

At the end of the year, the best ideas are rewarded withgold, silver and bronze medals at a gala. According to DrMichael Frenzel, TUI’s CEO, the prerequisite for winning aprize is a concept that promises and realises sustainableprofits:

“The Group has set itself highly challenging revenueand profit targets for the years to come and has openlycommunicated these to shareholders and investors. Inthis context, innovation is an important and essentialdriver and building block in achieving the aspiredgrowth targets. What is more, being the market leader,it is only natural that we also become the innovationleader.”

Exhibit 2 The innovation award programme funnel at TUI

Idea

Gate 1, 2

Communicationinfluence

Concept Business Plan

Award

Gate 3 Gate 4, 5, 6

Bericht

Qualitative Quantitative

31

Statements like this plus the selection of prominent man-agers in the organising committee are proof of top man-agement commitment and involvement. At the sametime, TUI was well aware of the complexity of managing aprogramme that addresses a corporate-wide audienceacross all hierarchical levels, more than 20 markets andfour completely different value chain segments (retailing,airline, incoming services and hotels). Of particular con-cern was the need to include the local companies thateventually must make it all happen. Including them is notobvious since the innovation award programme is essen-tially driven by top management and the corporate com-munications department and appeals directly to operating-level employees.

Part of the solution was to use a two-step approach. Inthe first step, all 50,000 employees were invited to partici-pate and hand in their ideas, driven by an intensive inter-nal communications campaign including an intranet portalfor innovation, newsletters, road shows, events and evenan intranet TV channel. As a result, some 3,000 ideaswere generated. In the second step, these ideas were fur-ther developed by a much smaller set of people in theform of teams of up to five people. Throughout the stage-gate process, strict pre-defined criteria were used to iden-tify and develop the most attractive ideas into businessplans.

Another part of the solution was to define an operationalorganisation at multiple levels and to set up a central proj-ect office. The latter has a strong recommendation andsupport function, while at the same time allowing for localfreedom of action. The programme is mainly governedthrough the group innovation team and a set of local inno-vation teams, one for each market and value chain seg-ment. Competition among the local markets takes placeunder the auspices of the local innovation teams, whereasthe overall set-up and decisions are made by the groupinnovation team, in which each local innovation team isrepresented. The nomination process follows the sameorganisational logic: first local innovation teams nominatetheir best concepts, then the group innovation team nomi-nates the finalists, and finally the board of directorsdecides on the winners (see Exhibit 3).

The selection of prominentmanagers in the organisingcommittee are proof of topmanagement commitmentand involvement. At thesame time, TUI was wellaware of the complexity ofmanaging a programmethat addresses a corporate-wide audience across allhierarchical levels, morethan 20 markets and fourcompletely different valuechain segments.

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Creative Power

A third solution was to invest significant effort intoaddressing and honouring all employees whose ideasfailed to pass a gate. Employees were very excited by theprogramme, and the disappointment of not succeeding isnot to be underestimated. While the overall focus is onpromoting and optimising the best ideas, a large part ofthe daily work was about giving feedback and encourage-ment in the form of small gifts, personalised letters, one-on-ones with supervisors and in some cases even theimplementation of the idea on a local basis. To this end, anidea booklet of failed ideas was created and distributed toall local managers for their review. This allowed them toassess whether the idea, although not fitting with theoverall requirements, still deserved local attention andpossibly implementation.

Insights for the executive

Because the innovation award programme at TUI managedto cope with the inevitably ensuing complexity, it hasbeen a great success so far. Having also studied innova-tion award programmes at other companies, we haveidentified six factors that determine the success of suchprogrammes:

33

• An objective need for innovation and mobilisation;

• Active and continuous top management commitmentand support;

• Proactively addressing fairness of play and any result-ing disappointment;

• A systematic and easy-to-understand process and“rules of the game”;

• A decentralised project management system withstrong central campaign support, including a task forcethat can rapidly step in and solve quality issues alongthe way;

• Continuous communication and progress monitoringsignalling a competitive atmosphere.

If you pay attention to these simple factors, you may find yourself en route to glory at the pinnacle of creativepower - may the best team win the Olympiad ofInnovation!

Ralf Baron … is a Director and Head of Arthur D. Little's Düsseldorf office. He isPractice Manager Travel and Transportation in Central Europe. RalfBaron specialises in innovation management, change management, andstrategy and organisation.E-Mail: baron.ralf@adlittle.com.

Reine Wasner … is a Senior Manager in Arthur D. Little's Zurich office and Head ofthe Technology and Innovation Practice as well as the Telecommunication,IT, Media and Electronics Practice. He specialises in strategic growth,innovation and technology management.E-mail: wasner.reine@adlittle.com

Michael Zintel … is a Business Analyst in Arthur D. Little's Wiesbaden office and mem-ber of the Travel and Transportation Group. He specialises in innovationmanagement, primarily in the aviation and tourism industry.E-mail: zintel.michael@adlittle.com

Exhibit 3 Organisation of the innovation award programme at TUI

Project Officeinfluence

Executive CommiteeTUI AG

Project Office

Head ofGroup

InnovationTeam

Northern

Europe

Western

Europe

Airlines

Hotels

Incoming

Central

Europe

Group

Innovation

Team

Ireland UK Nordic countries

Sweden Norway Denmark Finland

Fritidsresor Sportresor TEMA TUI Nordic

Functions

Sales Operator Platform

Communicationinfluence

Performanceresponsibiliy