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Innovating in Good Times & in BadBest Practices in Innovation

May 28, 2009

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Background

• This presentation highlights leading innovators from a wide range of industries and companies. These interviews offer a unique insider’s view into the world of innovation—what makes it work, what holds organizations back, and what critical advice new innovators need to know to be more successful with innovation overall.

• Topics Covered– Defining Innovation– Innovation Metrics– Innovation Process– Role of the Innovation Team– Getting Started with Innovation– Innovation Competencies and Traits– Rewards and Recognition

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Interviewee Demographics

• 12 interviewees to date:

• Representing a broad spectrum of perspectives:– Global organizations – Innovation leaders and practitioners– Corporations and non-profits– Cross-section of industries

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Key Findings

1. The importance of defining innovation2. Embracing ‘innovation inside’3. Shifting from problem-solvers to problem-definers4. Role of the innovation team: one size doesn’t fit all5. Rewarding is more about ‘how’ than ‘how much’6. Advice on Getting Started

• Support from the top is essential• Understand where you are and where you want to go• Expect failures; publicize successes

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1. The Importance of Defining Innovation

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1. Organizations need to clearly define innovation• Defining what innovation means to the organization is seen as

one of the largest challenges faced by innovation practitioners.• Innovation is being defined in a number of ways:

– Breakthrough vs. Incremental– Internal vs. External

“A lot of people call innovation ‘things that create improvements by 5 or 10 percent.’ But, if I employ new to the world, truly disruptive technologies, then I’m changing the paradigm so that I see ‘orders of magnitude’ improvement. That's a whole different kind of innovation.” – Sandia National Laboratories

“Be clear with your definition of innovation and be really clear about the mandate for innovation within your business.” – Thomson Reuters

“One thing we needed to do was to understand sort of the baseline of what is required when we say ‘let’s innovate’. Whether regulatory or legal, what is the requirement? What is the business goal? Is the goal to reduce cost? To increase speed of delivery to customers? To increase satisfaction, of quality service? The first step is to define what your agenda or your goal is.” – General Electric

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1. Organizations need to clearly define innovation• Defining innovation also involves aligning everyone around a

common language and lexicon.• It’s about innovation stewardship and showing employees what

constitutes an innovation within your organization.

“You need to have a common language, a common process, a common system.” – Unilever

“[My team focuses] on generating a common language and then creating the basic environment or infrastructure to enable the businesses to innovate.” – Thomson Reuters

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1. The importance of defining innovation

• A clear understanding of what innovation means to the organization sets expectations and roles.

• It enables efficiencies by getting everyone on the same page.• A shared definition of innovation is the first step in building an

innovation-driven culture.

• How is innovation defined in your business group or throughout your organization?

• Does everyone clearly understand what constitutes an innovation and what isn’t considered an innovation?

• What are you doing to engage everyone in your organization around innovation?

Implications:

Considerations:

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2. Embracing ‘Innovation Inside’

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2. Looking beyond new products

• Innovation is more than just new product development. It can take the form of developing new business models, new processes, forging strategic alliances, or creating new brand experiences.

“[Information Technology] is one aspect of innovation, it's not the only thing; we’re trying to talk more about business models and operational innovation, mergers & acquisitions innovation, and all kinds of stuff beyond just new products or services.” – Wachovia Bank

“[Innovating beyond just new products] is a key one for us. We continue to drive our costs down, and that’s one of our key strategies of the company. Our CEO looks to us and says, "How can we continue to simplify and reduce cost? How can we innovate in this space?" We provide large cost savings to the company. In turn, we’re able to keep on investing that into innovation on both the business transformation side and on the product or R&D side.” – Procter & Gamble

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2. Focusing on cost-savings and efficiency innovations• While some companies are focusing on new products to drive

top-line growth, there is a shift toward innovations that increase cost savings and increase efficiencies to affect the company’s bottom-line.

• These ‘internal’ innovations are becoming more and more relevant in today’s economic climate.

“There’s a very good opportunity for us to focus innovation not only on new products and services, but on all the other facets such as cost saving, process, business model, and management innovation. I’m actually highlighting internal innovations more than external innovations.” – Reed Elsevier

“Our ‘smoke-free’ initiative actually lowered our operating costs by reducing the time it takes to clean a room and the number of times we had to replace curtains, bed sheets, etc.” – Westin Hotels

“[As part of the legal group for our division we are] re-looking at outmoded ways of providing legal service and outmoded legal models and coming up with a new way to do the same thing, maybe faster, cheaper, easier. The law may be static, but how one delivers legal service is a very dynamic opportunity for change.” – General Electric

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2. Embracing ‘innovation inside’

• There’s more than one type of innovation.• Leading innovators are emphasizing the importance of

‘internal’ innovations in addition to ‘external’ ones.• By focusing on innovations that reduce costs and increase

efficiencies, corporations can then use those cost-savings to fund growth-oriented innovations.

• Is your team looking solely for new product ideas or are they expanding their horizons?

• Are there any ‘internal’ innovations you can highlight as an example to the rest of your organization?

Implications:

Considerations:

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3. Shifting from Problem-Solvers to Problem-Definers

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3. Shifting from problem-solvers to problem-definers• There’s a push to build out the front end of the “front-end” of

innovation.• Too much emphasis has been placed on solving problems and

‘getting ideas’ versus asking the right questions to better understand the opportunities that should be explored.

• Companies need to focus on gathering more consumer insights and practicing foresight to better inform the innovation process.

“We’ve spent too much time on the front-end, the brainstorming. The problem is, we don’t know what we’re brainstorming on or the problem we’re trying to solve. We should be just as much problem-definers as we are problem-solvers.” – Wachovia Bank

“[You look at large companies and] they're spending about 15 percent on R&D. But don't get fooled. When they say R&D - is it R, or is it really D? If you really did portfolio management and looked at their portfolio and said I want to know what is big R - truly concept development, new to the world-- what they're doing is D. That's not innovation.” – Sandia National Laboratories

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3. Shifting from problem-solvers to problem-definers• Leading innovators are using these insights to clearly identify

and define the root problem to arrive at better solutions.

“I really want this problem definition thing done so I can go into solution mode. I want to define the problem space, the barrier space, and my criteria for ranking those ideas. You'll be ready to dive into the solution space because you’ll now have no more quibbling or moaning about what the problem is.” – Pfizer

“Some organizations say: “Let’s find all the cool technologies and ideas out there, and then we’ll go find a problem that it solves.” We take that and we reverse it. We say: “Let’s have a clear understanding of the problem we need to solve.” … We make sure the problem is well-defined first, and then come up with the innovations to solve those problems” – Procter & Gamble

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3. Shifting from problem-solvers to problem-definers

• The front-end of innovation needs to be redefined with a focus on better problem identification and problem definition.

• Innovation groups can help facilitating innovation efficiency by aiding business units in better front-end efforts, allowing those teams to focus on execution.

• How much time does your organization spend on garnering insights or identifying new hunting grounds to explore?

• Are there tools, processes, or resources in place to help/force teams to better define their innovation problems before they begin solving them?

Implications:

Considerations:

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4. Role of the Innovation Team:One Size Doesn’t Fit All

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4. Choose a structure and role that’s right for you

• The role of the innovation team varies across organizations. Often this takes the form of ‘Incubator’ or ‘Facilitator’.

• In organizations where innovation programs are relatively new and an innovative culture is still emerging, innovation groups seem to take the Facilitator role.

“The role can vary depending on the individual business’ needs. In our current scenario, the central innovation team is a ‘consultancy’ both on the process of innovation and the activities required to run the process. We engage both in embedding innovation into the processes of the business and helping run the innovation process to produce and advance ideas. In the end, it is about recognizing what is right for the business and what the culture will accept.” – Reed Elsevier

“The role of the innovation group should be problem-definers, mentors, and facilitators. Business units are too focused on execution to think and innovate. We have to take a longer-term view to really be innovative.” – Wachovia Bank

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4. Choose a structure and role that’s right for you• In organizations with a strong culture of innovation, where

everyone is expected to contribute their ideas, ‘Incubator’ and hybrid roles tend to appear, giving innovators the opportunity to see their ideas through to launch.

“The way our organization works, the innovation group does both. They work on exploratory concepts, but because they’re brand-assigned, they also are responsible for driving day-to-day development. We live with [an idea] from concept to the moment [it launches in the market].” – Estee Lauder

“The role of the innovation team should be to foster an environment where ideas can flourish.” – Westin Hotels

“Innovation groups should be a greenhouse for ideas – protecting young ideas from being killed off before they have a chance. We need to be challengers of the norm. Do-ers. Connectors.” – NESTA

“Incubator and Facilitators. Once we take it out of incubation, we hand it over and guide where needed.” – Procter & Gamble

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4. Many minds; one focus!• It takes both left- and right-brain traits to be a good innovator.

Although it’s rare to find all these traits in one person.• The key is to create a diverse team that encapsulates all the

necessary qualities.

“My background is accounting, and I’m in innovation now. You need a lot of different types of personalities. I think any person can be a valued contributor to an innovation organization. It’s just a matter of knowing your role within that group.” – Procter & Gamble

“It’s about having the ability to think with both the left and right brain in my view.” – Thomson Reuters

“Broad inter-technical competencies, a strong team player, because you’re going to be on a team. It takes diversity. People who are analytical, people who are creative and people oriented. You need different social styles.” – Sandia National Laboratories

“Creativity, capability and discipline. Every human being has all these skills. You require them in the right balance. What you need is basically diversity of mind within the team. Everybody can do innovation.” – Unilever

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4. Role of the innovation team: one size doesn’t fit all

• The structure and role of the innovation team evolves with the sophistication of the organization and its culture.

• There’s a shift from getting multi-skilled individuals to the realization that organizations need to think of the right set of skills for well-rounded teams.

• Has the role of your innovation team been clearly defined? What is it? How will it evolve?

• How can you ensure you have the right mix of innovation traits in your team?

Implications:

Considerations:

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5. Rewarding is More About ‘How’ than ‘How Much’

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5. Recognition is more valuable than monetary reward• One-off monetary rewards are rarely used as incentive to

innovate. Recognition is by far the largest motivator.

“It’s not all about money. The softer rewards are more powerful. A feeling of contributing to the business and some positive recognition from your peers or superiors. We run a monthly Honour Roll and the winner each month receives a personal email from the CEO.” – Reed Elsevier

“Early on in the process it’s very much about recognition. And again, it depends on the culture of the company and the people involved. Then, once your idea is further developed, I firmly believe that you’ll get more from the individual if you pay for results.” – Thomson Reuters

“I personally think that the most effective reward is recognition, pure and simple. I don’t think you have to put money around it. I don’t think you have to create plaques. I think recognition is fundamentally the most important tool.” – General Electric

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5. Recognition is more valuable than monetary reward• Personalizing rewards and recognition makes the largest

impact.• Being sensitive to, and understanding, how someone prefers to

be rewarded or recognized is equally as important as the reward itself.“We survey employees asking them what they’re passionate about. Rewards

are then given out based on those preferences. We ask how people like to be recognized – privately or publicly.” – Westin Hotels

“Some people say, "Forget the personal note. Just give me some time off." A half a day or a day off in recognition of what they did is pretty great.

It’s about just knowing the individual and tailoring the recognition, rather than having a program where, "If you come up with an idea that saves X, you get the watch. If you come up with this, you get the car." I don't think that works.” – Westin Hotels

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5. Rewarding is more about ‘how’ than ‘how much’

• Money isn’t necessarily the main driver of motivation.• Taking the time to understand your employees’ passions and

interest is the first step in optimizing a rewards and recognition system.

• The largest impact comes from personalized rewards and recognition.

• How do you currently reward and recognize your team members? Is there room for improvement?

• To what extent do you understand what personally motivates each individual on your team?

Implications:

Considerations:

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6. Advice on Getting Started

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6. C-suite support makes or breaks innovation efforts• Genuine support and involvement of the CEO and senior

management was mentioned unanimously as one of the most important things when starting an innovation program.

“Get Board / leadership support. We have it. Innovation is equal to growth and it has to be driven by the CEO. Nobody else can do it.” – Unilever

“Corporate sponsorship and leadership around innovation is key. If you don’t make it a priority and you don’t drive that into the culture, I don’t think you’ll have a strong innovation pipeline.” – Procter & Gamble

“Don’t do it unless the CEO, or whoever your equivalent of the CEO is, buys into it. Just don’t.” – Thomson Reuters

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6. Understand where you are & where you want to go• Getting started with innovation requires an clear

understanding of where innovation stands within your organization.

• Leading innovators are using third parties to assess the state of their innovation programs and create a clear roadmap for where you want innovation to take you.

“Assess the situation and figure out exactly what the need for innovation is.” – Unilever

“Assess yourself – reality vs. perception. Take an assessment or have someone else do it – a third party or someone that has an objective view.” – Wachovia Bank

“You need to start with a successful roadmap and try not to do the impossible too quickly… Prioritize where you want to focus inventing.” – Estee Lauder

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6. Expect failures; publicize successes• Failure is to be expected with innovation. Encouraging a

climate that supports experimentation and ‘smart’ risks is key.• When launching an innovation program, it’s important to take

on quick wins that initially show traction and success to the rest of the organization.

“Tell others about the successes and failures. Keep everything out in the front so people see it’s OK to win and lose.” – Whirlpool

“Fail fast, often, and cheap. The one thing all innovators have in common is they try and discount lots of different approaches along the way. Don’t try to endlessly seek ‘the’ disruptive innovation to end all innovations.” – NESTA

“Success breeds support. So, when they can actually see concepts and actually see us do innovation, watch us do it, teach them to fish, that breeds

support.” – Wachovia

“I think we, like many companies, could do a much better job experimenting and ‘failing early’ – as long as we continue to learn from our failures as well as our successes.” – Reed Elsevier

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6. Advice on getting started

• Support, strategy and smart risk-taking are three essentials to success. A mechanism for each must be established or you risk program failure.

• Be prepared to showcase failures and highlight successes.• Understand why you’re engaged in innovation in the first place.

• How is management participating in innovation? Is it enough?• How as your innovation strategy been defined and

communicated?• Have you defined and communicated what a smart risk is – and

isn’t – in your organization?• Do you know the state of innovation in your organization right

now?

Implications:

Considerations:

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Conclusions• Having a clear, shared understanding of what defines innovation in

your organization is crucial to innovation success.

• The current economic climate is driving more organizations to identify innovations that result in lowering operating costs and realizing efficiencies, particularly given the current economic climate.

• Leading innovators are focusing on the front end of the ‘front-end’ to better define the problem to be addressed and identify growth platforms for their business.

• Innovation teams support their organizations in a variety of ways – from incubating ideas to facilitating processes or both.

• The most impactful way to reward your team members is to understand what truly motivates them.

• To move forward with innovation, you need to take stock of how your innovation program is currently performing.

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about futurethink.

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futurethink is the ‘how-to’ of foresight + innovation.

We help organizations embrace foresight practices to anticipate change, and enhance innovation capabilities to act on it. futurethink offers the research, tools, and training that organizations need to easily build a futures-based competency and quickly produce sustainable results from their innovation efforts.

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futurethink Offerings:

We Help Organizations Grow

Consulting- Innovation Diagnostic- Acceleration Workshops- Experiential Fieldtrips- Stewardship Programs

Research & Tools- Premium Membership- Research Membership

Training- Foresight Capabilities- Innovation Capabilities

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futurethink Training Overview

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futurethink Consulting Services• Innovation Diagnostic - paints a clear picture of your program’s

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Email: innovate@getfuturethink.com

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