The Discipline of Innovation

Myths of innovation excellence

• Innovation is driven by creativity and sparks of genius• Act like a start-up• Innovation has to let a thousand flowers bloom• Game-changing programs have to separated from the

core business• Culture has to change

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Truths are more subtle

• Innovation is driven by creativity and sparks of genius

• Innovation stems from being customer-centric, eager to experiment, and rigorous. These are capabilities that can exist throughout the organization

• Act like a Venture Capitalist, think carefully about how to balance the innovation portfolio, embrace fast failure

• The project funnel’s shape totally depends on organizational and strategic factors

• Act like a start-up

• Innovation has to let a thousand flowers bloom

• Game-changing programs have to separated from the core business

• Culture has to change

• Separation and integration must be balanced, new ventures may eventually “graduate”

• Culture is a lagging variable, not a leading one

Myths Truths

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Four archetypes of innovation

Marketplace of Ideas

Visionary Leader

Innovation through Rigor

Collaboration-based Innovation

• Broad numbers of employees have innovation goals

• Extensive use of online collaboration tools

• Industry permits fast experiments in silos

• Industry has long lead-times for new offerings, requires cohesive vision of the future across functional silos

• Planning and governance structures may be relatively informal

• Structured approach to innovation used cross-functionally

• Approach tied to processes, governance, structure, training, and metrics

• Organization excels at commercializing innovations created by others

• Strong business development function

• Organization adept at rapidly trialing new offerings

Source: Wunker and Pohle, “Built for Innovation” Forbes, 2007

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Responses by systematic innovation firms

• Pet projects that interested only a few visionaries, e.g. concept “pod” vehicles

• Herculean efforts that became disconnected from commercial realities, e.g. EV1

• Disconnected islands of innovation in a sea of status quo, e.g. NUMMI factory achieving record quality since the 1980s

• No cohesive strategy, governance, or accountability

Very Common, and Unlikely to Succeed

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• Clear process for handling new ideas and new ventures, led by CTO and CEO

• Portfolio plan for how many ventures are sought, of what size and commitment level

• Specific strategic priorities, e.g. materials science applications in electric vehicle powertrains

• Active partnerships to bring novel offerings to market fast

Atypical, but Poised for Success

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Root causes of failure and success

Failure Factors

• Unclear purpose• Capture by pet projects• Designed to satisfy only the

company’s biggest, most profitable customers (today)

• Overly influenced by what the industry has been, and not what customers need the industry to be

• Projects move into “valley of death” after inception but before broad commercialization

• Too much money thrown at efforts, too quickly

Success Factors

• Competitive strategy guides the process

• Focused ideation around priority themes

• Development and commercialization processes

• Attention paid to HR – staffing, incentives, etc.

• Governance balances independence with constituency-building

• Metrics are broad enough to capture the many facets of innovation, but narrow enough to be manageable

• Bias toward action – get moving quickly

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Factors that impact program design

• Will projects be disruptive or sustaining to the core business?

• Will most innovations come from inside the organization or from the outside?

• How differently can this new process act from business as usual without triggering “corporate antibodies”?

• How much ability is there to experiment and iterate with in-market tests?

• How tightly should efforts be tied to existing functions and business units?

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Programs may eventually become multi-threadedProcter & Gamble example

• Dedicated home for new ventures requiring little integration with the core business

• Example – Mr. Clean Car Wash

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• Facilitation for dedicated brand teams delving into a defined strategic area

• Example – SWASH fabric refresher for Not Quite Dirty clothes

• Open door for potential partners, as well as tight collaboration with small network of suppliers and retailers

• Example – Crest Whitestrips, leveraging trash bag technology from Clorox

• Mandates and methodologies for individual product areas, along with trainers, facilitators, idea-sharing, competitions, and awards

• Example – Head & Shoulders scalp examinations at retailers

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Variables to work through

• Mandate – What does this program do and not do? What is its portfolio plan?

• Process – What process should it follow? How to balance planning with entrepreneurism?

• Governance – How to balance flexibility with buy-in? • Metrics – What is success? How is that measured before programs are

scaled up?• Staffing – How do we provide incentives to staff throughout the

organization to collaborate on innovation?• Mechanisms – How do we facilitate idea sharing and outreach?• Impetus – What must come first? Where do we direct the energies of the

broader organization?• Culture – How do we address cultural issues? What are the biggest

impediments and the bright spots?

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Relevant services from New Markets

Light-touch counsel on strategy-shaping process

Facilitation of consensus-building meetings

Deeper involvement in strategy and solution creation

Structuring of primary research and interpretation of results

Business plan creation

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Who is New Markets?

• Experts in reframing market space and generating growth• Senior

experience• Creative and

pragmatic• First-class

consultants, thought leaders, and entrepreneurs

Recent Clients

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Our team’s publications have appeared in:

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Contact

Stephen WunkerManaging DirectorNew Markets Advisors245 First Street, 18th FloorCambridge, MA 02142 USATel. +1 617 337 3060Fax +1 617 337 3070swunker@newmarketsadvisors.com

Copyright 2013 New Markets Advisors