innovation: the classic traps
TRANSCRIPT
Innovation:The Classic
HBR’s 10 must reads on innovation
Rosabeth M. Kanter,Ernest L. Arbuckle Professor of Business AdministrationHarvard Business School
Innovation: The Classic TrapsFull Article is at HBR (2006)https://hbr.org/2006/11/innovation-the-classic-traps
About the Author:
Li WeiTechnology commercialization managerExploit Technologies Pte Ltd (ETPL)Agency for Science, Technology and Research (A*STAR, Singapore)
B. Eng & Ph.d (Engineering)Nanyang Technological University Singapore
Summary and presentation by
M.B.A.INSEADFontainebleau, France
Innovation is important Most companies fuel growth bycreating new products and services
$
too many firms repeatthe same and old mistakes intheir effort to innovation
Yet
There are 4 classic
trapsFor innovation
Strategy Mistakes
Process Mistakes
Structure Mistakes
Skills Mistakes
Strategy Mistakes
Hurdles Too High, Scope Too Narrow
In the 1980s…
Time Inc. wanted to develop new publications to generate revenue
Dear Employees,
We want your best ideas for new magazines to generate revenue and profit.
Cheers
Time Inc. Management
People or Sports illustrated are two of the company’s legendary successes
Focusing only on big impact project, Time. Inc. was slow to develop new publications for a long time
In the 1990s …
Quaker Oats wanted to stay competitive in the market through its product innovation
Product
ProductDistribution
Packaging FinanceMarketing
Huma
n Res
ource
Service Production
Failed to take advantage of the distribution channel by its Snapple beverage acquisition
• Rejecting opportunities that at first glance appear too small
• Assuming that only new products count –Not new services or improved processes
Strategy Mistakes: Hurdles Too High, Scope Too Narrow
Remedy: Widen the search,broaden thescope A broad base of early stage ideas
or incremental innovations
Remedy: Widen the search,broaden thescope A broad base of early stage ideas
or incremental innovations
Remedy: Widen the search,broaden thescope
A few big strategic bets
A portfolio of promising midrange ideas in test stage
A broad base of early stage ideas or incremental innovations
Remedy: Widen the search,broaden thescope
A few big strategic bets
A portfolio of promising midrange ideas in test stage
A broad base of early stage ideas or incremental innovations
After 1992, Time Developed (Or bought) about 100 magazines, which dramatically increased the company’s revenues and profits
Early in its history, the U.S. auto industry gained a breakthrough from the innovation from its financial functionsConsumer financing opened mass markets for products that previously only the affluent could afford.
Marketing a component directly to consumers is one of the great breakthrough for the technology giant
Strategy Mistakes
Process Mistakes
Control Too Tight
In 2000 …
AlliedSignal (Now Honeywell) soughtnew Internet-based products andservices
These innovation projects were subjected to the same planning, budgeting and finance metrics for established businesses
What emerged were often retrofitted versions of ideas that had been in the pipeline anyway
In early 1990s …
Bank of Boston (now part of Bank of America) set up an innovative unitcalled First Community Bank (FCB)
BANK
At the beginning, the usual performance metric is still applied to the new initiative
The “underperforming” branches should be closed!!
FCB leaders had to invent their own metrics and find creative ways to show results that impress the management
• Strangling innovation with the same tight planning,budgeting and reviews applied to existing business
• Rewarding managers for doing only what theycommitted to do – and discouraging them frommaking change as circumstance warrant
Process Mistakes: Control Too Tight
Remedy: Add flexibility to planningand control system
Reserve pools ofspecial funds forunexpectedopportunities
Image©123RF
The innovation process requires exemptionfrom some corporate requirements
The Office is an initiative from a newrecruit, using money originally allocatedfor a new BBC training film.
Ocean Spray stole a march on Amercia’slargest juice purveyors (P&G, Coca-Cola, etc)and got ahead of them with an 18-monthexclusive license for the introduction ofTetra Pak’s paper bottles to US Market.
Ocean Spray stole a march on Amercia’slargest juice purveyors (P&G, Coca-Cola, etc)and got ahead of them with an 18-monthexclusive license for the introduction ofTetra Pak’s paper bottles to US Market.
The big companies’ funds hadalready been allocated for the year
Image©123RF
Strategy Mistakes
Process Mistakes
Structure Mistakes
Connections Too Loose, Separations Too Sharp
In mid 1990s …
Carve-out its new internet venture,WorldNet service, as a distinctbusiness unit with its own P&L
Tensions are exacerbated between AT&T mainstreammanagers and WorldNet because of cannibalization
of existing business and culture crush
Image©123RF
Mainstream managers grabbed control of WorldNet andproceeded to starve it, restraining important telecominnovations in which AT&T could have been the pioneer
US Charter schools were freedfrom the rules of public schoolsystems
US Charter Schools
They could innovate and thus service as modelsfor improved education
However, There islittle evidence thatcharter schools haveinfluenced changes inthe rest of their schooldistricts
• Isolating fledgling and established enterprises inseparate silos
• Creating two classes of corporate citizens – Thosewho have all the fun (Innovators) and those whomust make the money (Mainstream managers)
Structure Mistakes: Connections Too Loose, Separations Too Sharp
Remedy: Facilitate close connections betweeninnovators and mainstream businesses
Productive conversations should take place regularlybetween innovators and mainstream business managers
Image©123RF
Let Innovation groups have aresponsibility to serve themainstream while alsoseeking bigger innovationsfor new businesses
Flexible organizational structures, in which teams acrossfunctions or disciplines organize around solutions.
Ex-CEO Howard Lester
The Company’s success as amultichannel retails can beattributed to the ways its e-commerce pioneers connectedtheir development to the rest ofthe company
PNC Financial Service Group established the New-Products Group with two objectives
Mainstream Product Development(Pricing and Product Enhancement)
Growth Engines in new capabilities(Technology-enabled service, etc)
In 2005, the company’s sales ofemerging products were up 21%,accounting for 46% of all sales
Strategy Mistakes
Process Mistakes
Structure Mistakes
Skills Mistakes
Leadership Too Weak, Communication Too Poor
In 2005,
The independent R&D unit,Invention Factory developedTravelGear, an innovative design,allowing a user to travel with asingle pair of shoes for differentoutdoor conditions
The leader of innovation teamfailed to develop the communication channels and relationships necessary to support any new product launch
The sales force became so miffed at not being included in the Invention Factory's developments that they refused to sell TravelGear products
In 1980s,
Leaders of new-venture teams oftenleft the team (Promotion, or jobrotation) before the work had beencompleted.
The company’s preferencefor the frequency withwhich individuals makecareer moves make it hardfor new ventures to dealwith difficult challenges
A technology bias made it hardfor old-school managers of thatera to appreciate the value ofteam bonding and continuity
In mid-to-late 1990s,
The manufacturer of diskdrives had 7 different designcenters working oninnovation
Seagate’s engineers andmanagers lack positivenorms for group interaction.The centers competed ratherthan cooperated.
Lowest R&D productivity inthe industryè loss ofmarket share, disgruntledcustomers and decliningsales
• Undervaluing and underinvesting in the human sideof innovation, focusing only on technology
• The leader neglects communication andrelationship building outside the innovation team
Skill Mistakes: Leadership Too Weak, Communication Too Poor
Remedy: Select for leadership and interpersonal skills, andsurround innovators with a supportive culture ofcollaboration
Even the most technicalinnovations require strongleaders with great relationshipand communication skill
Innovations need connectors – people who know how tofind partners in the mainstream business or outside world– they flourish in cultures that encourage collaboration
Amalga (Known as google inhospital) was developed initially by doctors and researchers at the Washington Hospital Center emergency department in 1996
The success of the projectand its heavy adoption inearly years were attributedto Dr. Graig Feied and Dr.Mark Smith’s investment inthe human dimension
Dr. Craig Feied Dr. Mark Smith
Under a new CEO and COO,Seagate redesigned the organization into “core teams”, cross-functionalinnovation groups.
In 1998 …
CEO, Steve Luczo COO, Bill Watkins
Employees were trained in commonmethodologies for team building, both inconventional training program andoutdoor activates in remote locations
To lead core teams, Seagate promotedpeople with strong relationship skillsabove others with greater technical skills
The core teams createddramatic innovations thatbrought the company backto market leadership
Strategy Mistakes
Process Mistakes
Structure Mistakes
Skills Mistakes
Hurdles Too High, Scope Too NarrowRemedy: The innovation pyramid
A few big strategic bets
A portfolio of promising midrange ideas in test stage
A broad base of early stage ideas or incremental innovationsStrategy
Mistakes
Control Too TightRemedy: Add flexibility to planning andcontrol system
Process Mistakes
Connections Too Loose, Separations Too SharpRemedy: Facilitate close connections betweeninnovators and mainstream businesses
Structure Mistakes
Leadership Too Weak, Communication Too PoorRemedy: Select for leadership and interpersonal skills,and surround innovators with a supportiveculture of collaboration
Skills Mistakes
