ROBERT’SROBERT’SRULESRULES

INNOVATIONA 10-Step Program for

Corporate Survival

OF

RR

ROBERT F. BRANDSROBERT F. BRANDSwith Martin J. Kleinman

RR

RO

BE

RT

’S R

UL

ES

R

OB

ER

T’S

RU

LE

S O

F INN

OV

AT

ION

A 1

0-S

tep

Pro

gra

m fo

r Co

rpo

rate

Su

rviv

al

Innovation, the key to your company’s survival, must be encoded in your corporate DNA. It is an imperative—because you can bet your competitors are going at Innovation full-throttle.

Robert’s Rules of Innovation: A 10-Step Program for Corporate Survival chronicles decades’ worth of collective, invaluable experience contributed by Innovation guru Robert Brands and his international network of Innovate-For-Success experts. Much like Robert’s Rules of Order, which created order from chaos in meetings around the world, Robert’s Rules of Innovation sets a new standard for “doing” Innovation, equipping you with the principles needed to:

• Inspire, lead, and drive the process• Manage risk, without letting fear of failure kill

innovation• Create a formalized New Product Development

(NPD) process—an absolute must• Convince others to work outside their

comfort zone• Build value for your Innovation• Instill accountability—one of the most important

of Robert’s Rules of Innovation• Properly hire, train, and coach—to create,

reinforce, and enhance your company’s culture and mindset

• Stay open to new ideas• Observe, measure, and track NPD results—

essential to optimal ROI• Grow profi tably, which benefi ts shareholders,

stakeholders, employees, customers, and consumers

Let’s face it, whether you manage a multinational company or an entrepreneurial start-up, or if you are a manufacturer, distributor, service provider, supplier,

retailer, or a not-for-profi t, the pressures today—in terms of time, budget, everything—are unprecedented in our lifetimes. Robert’s Rules of Innovation introduces you to easy-to-implement, immediately useful world-class guidance for starting, nurturing, and profi ting from a culture of sustained innovation in the work environment.

Get passionate about creativity. Prepare to unleash your team’s abilities. Create the next home-run new product. Do it all with the high-performance ideas found in Robert’s Rules of Innovation.

ROBERT F. BRANDS is President and founder of Brands & Company, LLC (www.innovationcoach.com). Having gained hands-on experience in bringing innovation to market, creating and improving the necessary product development processes and

needed culture, he delivered on his charter to bring “at least one new product per year to market”—resulting in double-digit profi table growth and share-holder value.

MARTIN J. KLEINMAN is a New York–based business writer and marketing communications specialist (www.commstratpr.com). His experience includes work at a wide range of companies, such as DuPont, Johnson & Johnson, Mattel, Infiniti Automobiles, Coors, American Express, Fidelity, and more.

Praise for ROBERT’S RULES OF INNOVATION$34.95 USA / $41.95 CAN

(CO N T I N U E D O N BAC K F L A P)

(CO N T I N U E D F RO M F RO N T F L A P)

“One surefi re way to develop a compelling, competitive advantage is through Innovation. Every company needs this well-crafted blueprint to Innovation success.”

—Jaynie Smith, coauthor, Creating Competitive Advantage and President, Smart Advantage, Inc.

“I like Robert’s Rules of Innovation because it provides practical guidelines for ensuring successful Innovation. The author’s vast experience with Innovation projects provides context for understanding the challenges innovators are facing and how they can be overcome to become successful innovators.”

—Han Gerrits, CEO, Innovation Factory, and Professor, Vrije Universiteit, Amsterdam

“I hate rulebooks. But I love Robert’s Rules of Innovation. This highly practical book, with its hands-on advice and detailed guidelines, is guaranteed to help you turn Innovation from the enigmatic into the systematic.”

—Rowan Gibson, coauthor, Innovation to the Core

“Innovation: easy to talk about, hard to execute. Robert Brands teaches us not only how to create the conditions in which Innovation occurs, but how to verify that we’ve done our job at each stage. No business can truly compete without vibrant Innovation. Robert’s Rules of Innovation shows us how to get there and—most importantly—how to be consistent at it. Highly recommended.”

—Peter Firestein, author, Crisis of Character: Building Corporate Reputation in the Age of Skepticism

“As corporations understand more and more that consumers own brands, Robert’s Rules of Innovation brings the road map on how to deliver the new ideas people want to the market place.”

—Marc Gobe, President, Emotional Branding LLC and bestselling author, Emotional Branding

BRANDSKLEINMAN

E1FFIRS 01/12/2010 13:22:30 Page 4

E1FFIRS 01/12/2010 13:22:28 Page 1

ROBERT’SRULES

OFINNOVATION

A 10-Step Program forCorporate Survival

ROBERT F. BRANDSwith Martin J. Kleinman

John Wiley & Sons, Inc.

E1FFIRS 01/12/2010 13:22:29 Page 2

Copyright# 2010 by Robert F. Brands. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, ortransmitted in any form or by any means, electronic, mechanical, photocopying,recording, scanning, or otherwise, except as permitted under Section 107 or108 of the 1976 United States Copyright Act, without either the prior writtenpermission of the Publisher, or authorization through payment of theappropriate per-copy fee to the Copyright Clearance Center, Inc., 222Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or onthe web at www.copyright.com. Requests to the Publisher for permission shouldbe addressed to the Permissions Department, John Wiley & Sons, Inc., 111 RiverStreet, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online atwww.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author haveused their best efforts in preparing this book, they make no representations orwarranties with respect to the accuracy or completeness of the contents of thisbook and specifically disclaim any implied warranties of merchantability orfitness for a particular purpose. No warranty may be created or extended bysales representatives or written sales materials. The advice and strategiescontained herein may not be suitable for your situation. You should consultwith a professional where appropriate. Neither the publisher nor author shallbe liable for any loss of profit or any other commercial damages, including butnot limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technicalsupport, please contact our Customer Care Department within the UnitedStates at (800) 762-2974, outside the United States at (317) 572-3993 orfax (317) 572-4002.

Wiley also publishes its books in a variety of electronic formats. Some contentthat appears in print may not be available in electronic books. For moreinformation about Wiley products, visit our web site at www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Brands, Robert F., 1957–Robert’s rules of innovation : a 10-step program for corporate survival /

Robert F. Brands, with Martin J. Kleinman.p. cm.

Includes index.ISBN 978-0-470-59699-9 (cloth)1. New products. 2. Technological innovations—Management.3. Diffusion of innovations—Management. 4. Organizational change.I. Kleinman, Martin J. II. Title.HF5415.153.B725 2010658.4 0063—dc22

2009046362

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

E1FFIRS 01/12/2010 13:22:30 Page 3

DNA is a large part of who you are andwhat you become: I dedicate this book to

my entrepreneurial grandfather, whom I lookedup to, and who inspired me.

E1FFIRS 01/12/2010 13:22:30 Page 4

E1FTOC 01/21/2010 16:33:36 Page 5

Contents

Introduction ix

CHAPTER 1 INNOVATION, SURVIVAL, AND THE‘‘AHA!’’ MOMENT 1

How Do I Get to ‘‘Aha!’’? 3Innovation Is Not a Luxury 7Where Does Innovation Begin? 11

CHAPTER 2 THE INNOVATOR’S MANIFESTO:ROBERT’S RULES OF INNOVATION 17

Inspire 20No Risk, No Innovation 23New Product DevelopmentProcess 26

Ownership 31Value Creation 34Accountability 36Training and Coaching 39Idea Management 40Observe and Measure 44Net Result and Reward 46

v

E1FTOC 01/21/2010 16:33:36 Page 6

CHAPTER 3 THE INNOVATION AUDIT:THE INVALUABLE DISCOVERYPROCESS THAT SETS THE STAGEFOR ACTION 47

The Audit Process 48The Short Audit 50The In-Depth Audit 52The Importance of Establishing aBenchmark 60

CHAPTER 4 INNOVATION EMANCIPATION:KEYS TO FREEING YOURINNER INNOVATOR 65

Defeating Devil’s Advocates toBecome an Agent for Change 65

Innovation Democratization Isthe Key 67

The Role of the Consensus Builder 72The Path of an InnovationChampion 74

The Innovation Payoff:A Quick, Real-Life Story 84

CHAPTER 5 INNOVATION IN THE TIME OFMULTINATIONAL TEAMS 87

The Care and Feeding ofCreatives 87

For Creative People, It’s aboutMore than Money 91

Babel, Babble, and the GlobalTeam Leader 97

vi Contents

E1FTOC 01/21/2010 16:33:36 Page 7

Team Building, One Step ata Time 98

Viva la Difference! 101Aretha Was Right: It’sAll About R-E-S-P-E-C-T 106

CHAPTER 6 PATENTLY OBVIOUS:THE CARE AND FEEDING OF YOURINTELLECTUAL PROPERTY 109

Intellectual Property: The BigPicture 111

Intellectual Property 101 113Frequently Asked Questions 121Remember: The Wolves AreAlways at the Door 131

CHAPTER 7 INNOVATION IMPLEMENTATION 133

Getting Started 133Define Your Organization’s Needs 136NPD Process in Action 140Creating a Road Map to Success 146Guidelines for Progress 147

CHAPTER 8 INNOVATION CHECKLIST 151

Preflight Preparation 152Or If You ReallyWant YourInnovation Program to Flop . . . 167

Advice and Encouragementfrom the Pros: A RoundtableDiscussion 168

Sustainable Innovation and You 173

Contents vii

E1FTOC 01/21/2010 16:33:36 Page 8

APPENDIX A PRODUCT DEVELOPMENTPROCESS 177

APPENDIX B THE FIVE STAGES OF THEPRODUCTION DEVELOPMENTPROCESS: EXAMPLE 1 187

APPENDIX C THE FIVE STAGES OF THEPRODUCTION DEVELOPMENTPROCESS: EXAMPLE 2 193

Key Resources and Links 201

Acknowledgments 203

About the Authors 205

Index 207

viii Contents

E1CINTRO 01/08/2010 12:31:46 Page 9

Introduction

Innovation, the key to your company’s survival, must beencoded in your corporate DNA. It is an imperative—because you can bet your competitors are going at inno-vation full-bore.

This is true regardless of the size of your organization,no matter what business you’re in or what product orservice you provide. More so today than ever before,innovation is the holistic strategy that savvy leaders cre-ate, that flourishes in the right atmosphere (and found-ers in the wrong environment). Cultivated properly, withteams empowered and impassioned to do their best,innovation is the surefire way to development of market-place showstoppers that build value for organizationstakeholders.

Innovation takes guts. It’s not for the faint of heart andthe weak of will. I refer to a famous quote from U.S.President Theodore Roosevelt at the Sorbonne in Paris,back in 1910. In his speech, entitled ‘‘The Man in theArena,’’ our former Rough Rider President said:

It is not the critic who counts: not the man who

points out how the strong man stumbles, or where

the doer of deeds could have done them better. The

ix

E1CINTRO 01/08/2010 12:31:46 Page 10

credit belongs to the man who is actually in the

arena, whose face is marred by dust and sweat and

blood; who strives valiantly; who errs, who comes

short again and again, because there is no effort

without error and shortcoming; but who does actu-

ally strive to do the deeds; who knows great enthu-

siasms, the great devotions; who spends himself in a

worthy cause; who at the best knows in the end the

triumph of high achievement, and who at the worst,

if he fails, at least fails while daring greatly, so that his

place shall never be with those cold and timid souls

who neither know victory nor defeat.

My name is Robert Brands. I was born and raised in theNetherlands, and, over the years, I have led companiesaround the world, and have managed, teamed with, men-tored, and learned from an impressive group of dynamic,creative leaders. Some are fellow Vistage members (www.vistage.com) such as Jeff DeFazio and Jaynie Smith, one ofthis C-level organization’s most sought-after speakers andauthor of Creating Competitive Advantage. ‘‘A company mustcreate competitive advantages if they are not to rely onprice as their differentiator,’’ she says. ‘‘The road tosignificant competitive advantages depends on a cultureof innovation.’’

We come from different cultures, grew up speakingdifferent languages, and prospered in very differentindustries. But there are important traits we have incommon.

� We are not afraid to fail.We know how to break downthe barriers that derail innovation. How to encour-age creativity that leads to breakthrough products

x Introduction

E1CINTRO 01/08/2010 12:31:46 Page 11

and service. How to introduce systems and proce-dures that outmaneuver the competition now and inyears to come.

� We know people are resistant to change. And, im-portantly, we have the will to win the doubters overand build value for our organizations—often in theface of firmly entrenched corporate cultures andsilo-driven territorial behavior patterns.

� We are, in a very real sense, a fraternity of like-

minded professionals. We are passionate about theimportance of innovation for the long term—sustainable innovation, if you will. And it’s heart-ening to find that professionals with this mind-set aretruly found all over the world.

And that is good news for you. I have captured in thesepages decades worth of my collective, invaluable experi-ence. I call them Robert’s Rules of Innovation, and muchlike the Robert’s Rules of Order, which create order fromchaos in meetings around the world, they will help youunderstand the principles needed to create, nurture,profit from, and sustain a solid new product development(NPD) program.

The bookstores and online sellers offer stacks of com-prehensive, detailed texts on innovation, and on variousapproaches to generating innovation. My challenge, as Icontinued my work with companies the world over, was tocreate a hands-on, understandable, practical approach thatreaders can use easily and benefit from quickly, as in today.And I literally mean right this very minute. Because, let’sface it, whether you manage a multinational or an entre-preneurial start-up, whether you are a not-for-profit, man-ufacturer, distributor, service provider, supplier, or retailer,

Introduction xi

E1CINTRO 01/08/2010 12:31:46 Page 12

the pressures today—in terms of time, budget, everything—are unprecedented in our lifetimes.

So let me introduce you to the best thinking of myinternational network of innovators. Together, we willshow you how to start, nurture, and profit from a cultureof sustained innovation in the work environment. Weshare our experiences in ‘‘sidebar’’ case histories through-out the book, and to help you focus on next steps for yourorganization, every chapter concludes with ‘‘ThinkAbout’’ points we hope you’ll find valuable.

Passionate about creativity? Ready to unleash yourteam’s abilities? Eager to create the next home-run newproduct?

Welcome, then, to Robert’s Rules of Innovation.

xii Introduction

E1C01 01/20/2010 11:2:37 Page 1

1C H A P T E R

Innovation, Survival, and

the ‘‘Aha!’’ Moment

Remember back in the dark ages of, oh, several yearsago, where in some quarters it was legitimate to actually askquestions like:

� Should we innovate?� Should we create a new product development (NPD)program?

� How necessary is our research-and-development(R&D) department, anyway?

That last one in particularmakesme cringe. All of thesequestions, though, seem quaint in the context of today’sbusiness environment. It’s war out there. You innovate.Period. If you don’t innovate, you perish (Exhibit 1.1).Simple as that. If you are reading this book, you knowthat failure simply is not an option.

With innovation no longer a choice, the next questionfor many of the thousands of otherwise thoughtful

1

E1C01 01/20/2010 11:2:37 Page 2

executives I’ve met over the years—in a wide variety ofindustries—is, ‘‘Okay, we need to innovate. But how?’’ or,‘‘Okay, but we already have an NPD program in place, butit’s not working. You’re consistently late to market.’’

Where do you start? How do you fashion a programthat works within the context of your organization and itsunique culture?

You’ve come to the right place. If you’ve read thisfar, you know that innovation is the lifeblood of newbusiness. You want to outperform the competition butare unsure of how to proceed. Maybe you’ve benefitedfrom an innovative product or service but have beenunable to recreate this past success with any degree ofregularity. Or perhaps you face a mandate to cut budgetsto the bone—the so-called addition by subtraction.One ofthe first budget line items to be cut is often R&D—the verylast thing that should be eliminated during uncertaintimes.

In today’s business environment, Robert’s Rules ofInnovationwillhelp youcreateorder fromthechaos—clearly,

Time

Sal

es

Inno

vatio

n

Intr

oduc

tion

Gro

wth

Mat

urity

Dec

line

Inno

vatio

n

Gro

wth

Exhibit 1.1 Innovation Restarts the Product Life Cycle

2 Robert’s Rules of Innovation

E1C01 01/20/2010 11:2:37 Page 3

concisely, and helpfully. The cornerstone of Robert’s Rules ofInnovation is the set of 10 essential rules of innovationimplementation to create and sustain new business, detailedin Chapter 2. These rules are distilled from my decadesof experience as a leader of international product develop-ment teams, as well as input from my international networkof professional sources with experience on a wide variety ofproducts and services.

How Do I Get to ‘‘Aha!’’?

Throughout my professional career, my orientation hasbeen spent on new product introductions. While at PhilipsLighting as Manager–New Products, I developed the firstversion of an NPD stage-gate process and refined thisprocess in roles and companies that followed, such asGTE Sylvania and Kohler.

One highlight of my career came at a company Iheaded, called Airspray. Take a look in your kitchen,bath, or cupboard—in the United States, in Europe, inthe Pacific Rim. See those instant-foam dispensers, mostlikely hand soaps—the ones that work without chemicals orpropellants?Dishwashing liquids?Cleansers?Wepioneeredthat dispensing technology and created a ubiquitous pres-ence in every household, in both developed and emergingmarkets. (See Exhibit 1.2.)

I am often asked how we did it. How did we get to that‘‘Aha!’’moment, when we knew we had a dispensing designthat would turn the personal care product industry on itshead? Once the technology was perfected, how did we sellit in one market segment after another? How did weprotect our investment and ward off industry newcomers?How did we build a worldwide team and overcome the

Innovation, Survival, and the ‘‘Aha!’’ Moment 3

E1C01 01/20/2010 11:2:37 Page 4

cultural differences inherent in a multinational effort?And how did we build upon our first designs to keep tradecustomer, retailer, and consumer interest (and profitabil-ity) high?

The answer: innovation. It’s an overused word and verybroad in meaning. Before we continue, let’s take a closerlook at what I mean when I use the word innovation.

One of my professional associates, a true productinnovator, Peter Dircks, is the Vice President of ProductManagement and New Product Development at Hearth &Home Technologies. According to Peter, who has just

Exhibit 1.2 Foaming Hand Soap

Source: Rexam Airspray, B.V.

4 Robert’s Rules of Innovation

E1C01 01/20/2010 11:2:37 Page 5

redesigned his company’s flagship product line, trueinnovation is the optimum balance achieved by usingthe latest technologies, cost structures, styling, features,and services, and then successfully delivering that which is‘‘new’’ to match customer or end-user needs at the opti-mum price.

‘‘One needs to look only at the iPod as a perfectexample,’’ he says. ‘‘End users wanted the ability to pur-chase single songs, versus entire albums, as well as to easilycategorize and organize their MP3s and have all theinformation from the music industry. Apple deliveredon this by leveraging the use of the Internet (technology),developing highly intuitive software (iTunes), as well asutilizing their music industry contracts (distribution androyalty agreements) with a very cool physical product (theiPod itself, its styling, user interface, etc.).’’

According to Peter, ‘‘this is one of the best examples oftrue innovation, in my opinion, and why they have such aglobal market share MP3 player lead in what could havebeen a commodity product, like the TV.’’

Great example, Peter, yet let’s bear in mind that whileinnovation used to relate primarily with manufactured‘‘things’’ (products), companies have recently innovatednew services as well, as evidenced by new offerings inbanking, real estate, and insurance—the reverse mortgagecomes quickly to mind.

And there are hybrids as well: new products accompa-nied by an innovative service. Again, the iPod model—super electronics bundled with iTunes accounts for man-aging downloads and personal music libraries.

Here is yet another take on how to think about innova-tion, from my friend Bruce Sauter, who studied industrialdesign and was a driving force at Atari and, later, at a

Innovation, Survival, and the ‘‘Aha!’’ Moment 5

E1C01 01/20/2010 11:2:37 Page 6

division of Kohler Company. His incredible mind sits com-fortably at the confluence of product design, aesthetics,and the product’s emotional tie to the end user.

‘‘As I progressed in my career, my roles expanded togive insight into the fact that, for innovation to work andbe sustainable, it must be the DNA of the organization—one with visionary leadership,’’ Bruce told me. ‘‘Innova-tion is a holistic strategy for building organizational cul-ture, empowering the passion to create, developingcreative environments that can execute effectively, andcreating the potential for market leadership.’’

‘‘Innovation,’’ he continued, ‘‘is not just happening inthe front end of the business development process—itneeds to be pervasive throughout the entire value chain.’’

According to Bruce, and I think you’ll agree, innova-tion appeals to those of us who are passionate aboutcreativity, working in dynamic teams through hard timesand good times, building upon the free exchange of ideasand the successful execution of those concepts that resultsin a win. When an idea is discovered and implementedacross the value chain with success, a ‘‘sweet spot’’ is hit—right on the mark. It’s like winning the big game together.

Innovation is a cumulative process. It takes time andlots of energy. It is seeing people grow, open up, andsucceed. This is one of the great by-products of innovation,he said. Successful organizations have successful people.

What it all boils down to is this: finding, empowering,and fostering individuals and teams with the passion tocreate their environments where they do their work, andplay, and continually improve efforts to sustain the out-come. The rush you feel when things come together in justthe right way and result in market leadership—that’s whatit’s all about for me.

6 Robert’s Rules of Innovation

E1C01 01/20/2010 11:2:38 Page 7

Successful innovators will tell you over and over again,and it’s important to reflect on it here as well: Innovation isnot just about ‘‘creating new stuff.’’ It’s about creating anorganizational process that encourages the creation of newmethods, ideas, and, yes, products. It’s all about institutinga different way of thinking, doing, and creating value.

With all this innovation takingplace—fromnewwidgetsto new insurance products to newprocesses—it has becomemore important than ever for business leaders to instituteinnovation programs and manage them effectively.

Usually, I avoid clich�es (like the plague!). But theclich�e has its purpose: It is based on a common experi-ence, a real issue faced all the time. And the clich�e thatcomes to mind here, regarding innovation, is this:

Fail fast, but fail cheap.

In the dark ages, NPD program participants ideatedand created a new product and passed the torch to salesand marketing. Today, however, there are more complexissues within the organization that require flexible struc-tures and unprecedented cooperation across disciplines,teams, and business units.

So we now need bold tools such as new organizationalstructures, new forms of training, procedures, intra-company communications, and bold leaders who under-stand and can implement consensus across divisional andgeographic boundaries.

Innovation Is Not a Luxury

At this point, I know what some of you may be thinking:

We’re a smaller company, with less than $50 million

in annual revenue. We don’t have the time,

Innovation, Survival, and the ‘‘Aha!’’ Moment 7

E1C01 01/20/2010 11:2:38 Page 8

manpower, or money for this type of comprehensive

innovation initiative. Why can’t we just ‘‘wing it’’ like

we usually do?

As this is written, the media’s stream of negative finan-cial news appears infinite. Earnings are off. Consumerspending is down. Savings rates are up (maybe that’s notsuch a bad thing, though). Layoffs. Deleveraging. 401(k)sthat are now ‘‘201(k)s.’’

‘‘How can we afford an innovation program?’’ you ask.‘‘Maybe when things get better, we can revisit innovation,’’others might say. Like putting off that European vacation,postponing the purchase of that new Beemer, shelving thekitchen remodeling. Luxuries can be delayed, right?

Remember, innovation is not a luxury, even for today’smost successful companies. Sustaining success means on-going renewal of your intellectual property (IP) portfolio.After all, technologies become dated; end-user fashionschange; and new processes, materials, and capabilitiesemerge. Like breakers at the seashore, the life cycle of atechnology begins, crests, and falls off as, all the while, newtechnologies form and carry momentum of their own—anongoing cycle of innovation energy, if you will. Exhibit 1.3will help you visualize the ‘‘waves’’ of technology.

At Airspray, we applied this philosophy but extendedsales growth from the initial hair care product to skin care,to hand soap, to foaming body wash.

Innovation is a must-have. It’s your company’s life-blood. And remember, too, the perfect time to ramp upyour innovation efforts is exactly when your cash-strappedcompetitors are slashing their programs. Especially if youbelieve that we are in a major, global economic shift, notjust a garden-variety, cyclical downturn.

8 Robert’s Rules of Innovation

E1C01 01/20/2010 11:2:38 Page 9

BusinessWeek magazine recently reported on this veryissue. ‘‘Innovation is an easy target,’’ says VijayGovindarajan,a professor at Dartmouth’s Tuck School of Business. ‘‘R&Ddollars, by definition, lead to uncertain outcomes. Compa-nies don’t want failures during difficult times.’’�

Some companies are taking an innovation vacation,resting on past successes, making incremental changes tosuccessful products. But others, the smart ones, are look-ing at ways to reposition existing technologies in order toappeal to new end-user audiences. Here’s an example:Guitar Hero. The technology itself is cool, but not earth-shattering. What’s innovative is that its makers have cap-tured the imagination of customers who had not been

Sal

es

Time in the Market

Profitability(Net Income as % of Revenue)

First Innovation

Second InnovationThird Innovation

Exhibit 1.3 Repeating Innovation Is Critical to Sustaining Above-

Average Long-Term Profits

Source: Brands & Company, LLC.

�Reena Jana, ‘‘Is Innovation Too Costly in Hard Times?’’ BusinessWeek,

April 9, 2009.

Innovation, Survival, and the ‘‘Aha!’’ Moment 9