Traction

Innovation: Talk or Do?

Making Innovation Work:
How to Manage It, Measure It, and Profit from It.

Tony Davila, Marc J. Epstein, and Robert Shelton

Wharton Business School Publishing, Upper Saddle River, New Jersey; 2006; ISBN 0-13-149786-3; 334 pp.

Reviewed by John D. Trudel

 
This book is about the business side of innovation. I was favorably impressed, to where I put together a seminar linking this work to my own past writings and tested it on selected top managers.

I thought there would be high interest in the topic, given all the talk in the business and popular press about innovation. What I discovered instead is that managers are not willing to invest for much beyond motivational talks (e.g., people with capes in superhero costumes labeled “Innovation Man”) and finding simple rules for how to pick the winners and losers. That’s not the topic of this book. I expect the authors would say, “Innovation doesn’t work that way.” So would I.

Rather the book starts with two key ideas: 1) Innovation is a necessary ingredient for sustained success, and 2) Innovation is an integral part of the business. (pg. xx) If you don’t accept these precepts this isn’t the book for you. You have to believe innovation is a survival issue and be willing to do the work required. Not all CEOs meet these criteria.

It’s not that top managers object to having compelling, high-margin products; it’s that the word “innovation” has been so over-hyped. The subject, as Andy Grove says, “Is so much easier to talk about than to do.” Hard work isn’t as sexy as creativity seminars, making deals, and hoping to win the lottery by doing the next iPod or whatever.

Anyone who’s been successful at innovation can tell you it’s a messy, difficult process. If you accept that, the next question, if you’re a business, is how to manage it.

The first decision is “Who?” and the correct answer is that two levels of management are needed. Top management must set goals, provide support, and monitor progress, but people lower in the organization must be empowered to implement. Senior executives should be involved in setting policy, goals, and strategy, but they should not be intimately involved in designing and operating the elements of innovation. This is a tricky balance. (pg. xxv)

A fashionable topic today is outsourcing, but the book says this is the wrong question to ask. Innovation is simply too important to outsource completely. If you outsource it, you turn your firm’s future over to outsiders. Conversely, if you try to do it all yourself you will greatly increase your risk of failure. In general, success requires perspectives, expertise, and experience from outside your firm. The book argues that the best solution is partial outsourcing, better called partnering. (pp. 100-115)

Bluntly put, innovation is a voyage of discovery where experienced guides and explorers can be helpful. The rewards are great, but setbacks and mistakes are to be expected, as is “organizational resistance” to new things. It’s a difficult art, and, if you don’t tap the right outside viewpoints and expertise, a hard slog.

Finally, we get to the issues of metrics and culture. Innovation is not like a quality initiative where the whole firm is involved all the time. You want the right people involved, and no more. Small, nimble, and focused is better than large, ponderous, and inexorable.

Metrics turn out to be a large part of the problem. Regardless of what management says, what it does matters more. (pp. 25-28)

If your metric is Earnings per Share (EPS), it’s not related to innovation, and, in fact, possibly contra-productive. If your metric is number of products launched, you will at best get small incremental innovations, and, at worst, old products with new names. If you view new products as “R&D’s job” you may get powerful ideas, but will be unlikely to have them fit with what your business units can produce, market, or care about. Few animals will raise the young of a different species; most will kill them.

In short, if your top management views innovation as a corporate survival issue and is willing to invest and do the hard work, this book will be helpful. But if you are looking for motivation, quick fixes, and cost savings, it isn’t for you. I expect it will appeal to only perhaps 10-20% of CEOs, but some of these will be the leaders of tomorrow’s stellar firms.

Andy Grove is right. In the end, it gets down to doing, not talking.

What’s your experience with innovation? Are CEOs and managers willing to do the hard work?  Submit  your case study  on  how innovation  got or didn't get  traction to  Janice  Scanlan  CMC,  FIMC.

About the Reviewer John D. Trudel CMC (503/538-1169) helps firms with innovation, business creation, planning, and renewal. 

For  newsletters and more information about  innovation,  visit his website.

Copyright 2007, Traction. You are encouraged to pass on so long as attribution is given to Traction.

 
 

Opening Pandora's Box

Emerging Ways of Doing Business

Some people name iPod as an example of how music distribution has cut out the middleman.

Maybe. Or is there a new kind of middleman?  Pandora is an example of a new kind of middleman.

For free, you can build up to 100 radio stations using one, several artists or songs. What Pandora does is allow you to vote on what you want or don't want--but the neatest thing is they play music out of that genre so you can discover new artists. You can also hear clips of music, do research on artists, and, of course, buy music.

 

What was interesting to me is that Pandora was named on National Public Radio by a 20 year old student one of the six hot trends on the Internet.........but the big thing for marketing people is what a 60 year old woman likes about Pandora and a 20 year old woman is the same--we can discover new artists based on music we already like.

What music we enjoy is likely very different. And Pandora "knows" all of it.

Think about that from a marketing perspective. The possibilities for learning demographic trends to deliver a wide range of product or service segments could potentially expand and apply to any kind of product or service people have an interest.

Especially with a glut of information just a click away--will it be the Pandora's of the world that open boxes of information in ways those interested don't have to search, but can experience?

Just as Pandora is categorizing the "music genome" others such as librarians, professional societies and academics may do the same in other areas.

Is there a Pandora type application in your future?

Do you know of any businesses taking this new middleman approach? Is it gaining any traction?

PS. And Pandora is not just for your computer anymore. There's a new "Squeezebox" that you can enjoy Pandora through out your home with your stereo equipment.

It's not just music. Video has a new search engine.
While they don't have "affinity" built in yet (for example, on Amazon people who bought this book, bought this book as well), check out Blinkx

Copyright 2007, Traction. You are encouraged to pass on so long as attribution is given to Traction.


 

 

We'll Know It When We See It

If you've ever heard someone say or said it yourself, "we'll know it when we see it." That phrase describes an approach to tackling a complex subject. Just pinpointing an elusive area of your business can be challenging.

And anyone who's approached a multi-faceted issue knows that you wish you knew as much before you got into the issue as you did afterward. So we're inventing and "making it up" as we go along anytime we approach new territory.

Yet we often can't think creatively because we specify too tightly. A simple example: the need is to fasten two boards together, yet just by using the phrase screw two boards together you've limited the ways to fasten the boards together.

Reading the history of Proctor & Gamble in the book Rising Tide (Harvard Business Press, 2006) provides a candid look the starts and stops in developing and marketing new products . . . or making changes in diversity policies in plants for example.

Change is tough.

Tide detergent was such a difficult product to develop, that the R&D manager of the developer required the developer omit it from his project status reports because it was taking so long to work out the problems.

Can you imagine that happening today? It would take a gutsy manager.

Crest toothpaste had real issues of being accepted by the dental community. However, because there was a focus on what customers needed, these products have been two most successful . . . and lasting. So what we have is  "staying the course" but also learning as they go along.

However, there's another facet: these successful products were built around customer needs. Have many of our businesses today become obsessed with making a deal or doing a transaction, not with a purpose that serves a customer need?  

Contrast Toyota and GM on developing hybrid cars. Even though Toyota may be losing money initially on hybrids they bet on the future. GM dropped its hybrids. Its focus this past spring was trying to make a deal to buy Chrysler--before that Renault and Nissan. The Wall Street Journal never took GM seriously and pinpointed the ultimate "buyer." Yet I wonder how much energy was spent on this endeavor?

Will GM know it when they see it? I doubt it.

Tide, Crest and Toyota hybrids all have one thing in common: solving a customer need. So yes, they knew it when they saw it or when they would have to work on it further.

Except for making a deal, it's pretty uncertain what GM has in mind--and how it solves a customer need is fairly dubious as well.

Can any of the merger and acquisition people tell me how they will know it if they see it? Much less how it will produce any business traction for GM?

Daimler Benz may come out pretty well. Well, maybe not unless divesting will help them move forward.

Copyright 2007, Traction. You are encouraged to pass on so long as attribution is given to Traction.